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Pensions Insights - March 2021

22 March 2021
In our monthly update, Pensions Insights, we give you our take on the latest highlights in the world of pensions law and policy. If you have any queries about any of the issues covered, or you require advice on a pensions related matter, please do not hesitate to get in touch with your usual contact.

Case Law 

Upcoming cases in 2021
An appeal to the Court of Appeal of the decision in Britvic Plc v Britvic Pensions Limited (A3/2020/0316) is expected to be heard in May 2021.  This case concerned interpretation of the scheme's rules which the High Court decided meant that the employer could only substitute the rate used for calculating increases with a rate that was higher than would otherwise apply.

An appeal to the Court of Appeal of the decision in Hughes v The Board of the Pension Protection Fund (C1/2020/1342) is also expected to be heard in May 2021.  This case concerned the application of the PPF compensation cap which the High Court determined amounted to unlawful age discrimination. The DWP is responsible for the cap’s level and the legislation governing it and at the time the appeal was lodged the PPF confirmed that it would continue to apply the cap according to the current levels set by DWP.

New Law  

Timetable for Pension Schemes Act 2021 announced
The Pension Schemes Act 2021 received Royal Assent on 11 February and the pensions minister has now given a broad indication of the timetable for next steps (largely seasonal) including in relation to consultation on regulations and guidance which will set out the finer detail of how new powers etc will operate. 

In terms of timetable:

  • TPR is currently consulting on a draft policy that outlines how it will use its new powers in relation to criminal sanctions and it is expected that these powers and the criminal offence measures will apply from the Autumn.
  • Regulations in relation to climate change measures are expected to be laid in the Summer, to come into force ahead of COP26.
  • Also in the Summer, consultation is expected on draft regulations for scams and Collective Defined Contribution Schemes, with commencement on the scams measures from early Autumn 2021.
  • Consultation on the majority of draft regulations regarding TPR powers will start in Spring and it is expected will the powers will apply in the Autumn. 
  • In relation to the duty to give notices and statements to TPR in respect of certain events, consultation on draft regulations is expect to begin later this year, with commencement as soon as practical thereafter.
  • Consultation is expected on proposed regulations for the Pensions dashboard later this year with draft regulations before Parliament for debate in 2022. 
  • Consultation on draft regulations regarding defined benefit scheme funding is expected "later this year" and TPR will consult on its revised funding code at a date yet to be confirmed.

News

PLSA strengthens stewardship and voting guidelines in relation to investments to reflect pandemic and new climate regulations
The Stewardship and Voting Guidelines 2021 provide practical guidance for schemes considering how to exercise their vote at annual general meetings. Having undertaken a substantial review of the guidelines in 2020, the PLSA has this year focused on ensuring the guidelines remain relevant amid the challenges posed by Covid-19 and a fast moving regulatory environment and have made changes relating to:

  • Virtual AGMs – to reflect that virtual AGMs have become the ‘new normal’, enabled in law by the Corporate Insolvency and Governance Act on 26 June;
  • Workforce and remuneration practices – noting that significant pay discrepancies between a company’s senior executives and the rest of the workforce, as well as those based on gender or ethnicity, can be a signifier of wider issues with a workplace’s culture and processes and the fact that this has become particularly sensitive in the Covid era, where many companies have had to make tough financial decisions relating to workforces, and made use of Government support in order to pay wages; and
  • Climate Change - the guide has also been strengthened to reflect the Taskforce on Climate Related Financial Disclosures (TCFD) reporting requirements on premium listed companies, which may also bring in scope smaller companies in the coming years. 

Qualifying Earnings on the up whilst budget confirms Lifetime Allowance to Freeze
The DWP has published details of the auto-enrolment earnings trigger and qualifying earnings band to apply in the tax year 2021/22 as follows:

  • Earnings trigger - £10,000.
  • Lower end of the qualifying earnings band - £6,240.
  • Upper end of the qualifying earnings band - £50,270.

Whilst the earnings trigger and the lower end of the qualifying earnings band remain the same as last year, the upper end of the qualifying earnings band has increased meaning that a larger proportion of earnings require to be taken into account when calculating default statutory minimum contributions for auto-enrolment.

The lifetime allowance is the maximum amount of tax relieved pension savings that an individual can build up over their lifetime. The current standard lifetime allowance is £1,073,100.  Tax relief on any pension benefits taken over this amount is recovered by the application of the lifetime allowance charge to the excess (charged at 25% if the excess is taken as a pension or 55% if it is taken as a lump sum).

Since the 2015 budget the standard lifetime allowance has increased in line with the Consumer Prices Index, however the most recent budget announced that with effect from 6 April 2021 this increase will be removed so the limit will be frozen for the tax year 2021 to 2022 through to 2025 to 2026.

Further Reading

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