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Pensions Insights – March 2022

30 March 2022

In our monthly e-alert, 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 contact your usual contact.

Case Law 

Auto-enrolment contributions "not an optional duty that can be ignored during times of financial difficulty"- Morecambe Bay Wines Limited v The Pensions Regulator 

The First Tier Tribunal has held that furlough of employees coupled with financial difficulties was no excuse for an employer failing to comply with obligations to pay pension contributions required to comply with the auto-enrolment regime.  In this case the appellant had used the Coronavirus Job Retention Scheme (“CJRS”) and placed its employees on furlough. 

For the initial period of furlough, from 1 March 2020, the CJRS covered automatic enrolment pension contributions as well as wages. This changed from 1 August 2020, when employers were required to pay the pension contributions of furloughed employees themselves (and employer National Insurance). The appellant did not pay certain required contributions during this later period.

The Tribunal made clear that employers should not have been using the CJRS if they could not afford to pay the pension contributions for furloughed employees.  

Noting that it was appreciated that the appellant’s business was struggling the Tribunal held that an employer is not permitted to miss or delay making compulsory pension contributions in order to prioritise other aspects of its business and whilst this may mean employers have to make difficult decisions about whether they can afford to retain all of their employees, pension contributions are not an optional duty that can be ignored during times of financial difficulty.

New Law  

Occupational Pension Schemes (Fraud Compensation Levy) (Amendment) Regulations 2022 

Coming into force on 1 April 2022 the Occupational Pension Schemes (Fraud Compensation Levy) (Amendment) Regulations 2022 will increase the levy ceiling in respect of the Fraud Compensation Fund. The fraud compensation levy is paid by occupational pension schemes and is used to fund the Fraud Compensation Fund, which makes payments to certain schemes that have lost money as a consequence of fraud.

Currently set at 75p per member, the regulations will alter this to 65p per member for Master Trust schemes and.£1.80 per member for all other occupational pension schemes.

Finance Act 2022 – Royal Assent on 24 February

The Finance Act 2022 introduces provisions in relation to the increase of Normal Minimum Pension Age ("NMPA") from 55 to 57 on 6 April 2028 which include introduction of a protected pension age ("PPA") to allow some scheme members to retain a NMPA earlier than age 57.

Certain pension scheme members will be eligible for a PPA including members of HMRC-registered pension schemes whose scheme rules on 11 February 2021 conferred an unqualified right for them to take their pension benefits earlier than age 57.

A PPA will apply to all of a member's benefits (i.e. not just those accrued in advance of 6 April 2028) in the relevant arrangement, but a cut-off is included so that individuals had to have been a member of the pension scheme (where the scheme rules on 11 February 2021 already conferred an unqualified right to take pension benefits below age 57) before 4 November 2021 in order to have a relevant PPA.

New Notifiable Events – In force from April 2022?

At the time of writing the DWP are yet to publish a response to the consultation that included the draft Pensions Regulator (Notifiable Events (Amendment) Regulations 2021.  The draft Regulations include wording indicating that these would come into force on 6 April 2022.  With that date approaching it is not clear whether the new requirements will be delayed.

News

TPR issues Conflict in Ukraine guidance for trustees 

TPR guidance confirms that it expects scheme trustees to be vigilant and talk to advisers about any action which may be required.  Areas that should be considered are noted to include:

  • for DB schemes, short-term liquidity needs and how those  might be affected by margin calls and the need to meet short-term member benefit payments;
  • whether the employer or sponsor of the scheme has been affected, which for DB schemes may have consequences for the employer covenant: for example through any direct impacts to employer operations, through wider trading links where suppliers or customers are impacted, or through broader macroeconomic factors such as increased inflation, rising fuel prices or foreign exchange risks;
  • the likely impact of events on a scheme’s investments including short/medium-term risks;
  • in light of the potential heightened risk of cyber-attacks in the current environment, whether cyber safety procedures remain adequate or need further consideration;
  • the potential for heightened risk of financial crime, including scams, and whether related processes and procedures should be reviewed; and
  • whether investments remain aligned with the policies and principles set out in your statement of investment principles, including environmental, social and governance considerations 

Climate Change Rules – further TPR guidance issued

With the aim of offering trustees and advisers extra help as they work through comprehensive new duties on climate-related governance and reporting, TPR has published an illustrative example setting out how trustees might approach meeting the requirements of the new climate-related regulations.  This example has been added as an Appendix to TPR's existing Governance and reporting of climate-related risks and opportunities guidance.

The climate change rules initially apply to authorised schemes and those with relevant assets of £5 billion or more but will start to apply to schemes with relevant assets of £1 billion or more from 1 October 2022.

The Department for Work and Pensions has said it will consider whether to roll the rules out to smaller schemes in 2023.

Further Reading