Below is a summary of pension changes expected in the near future in addition to those outlined above. Changes since the last update are in bold & italic:
Steria (Pension Plan) Trustees Ltd v Sopra Steria Ltd and others: High Court claim seeking declaration regarding the requirement to obtain a section 37 certificate. The case was heard on May 22, 2017. The claim has been stayed until June 18, 2018, with both parties having been ordered to update the court before April 5, 2018.
Clarification of trustees' fiduciary duties in relation to longer term investment risks – the DWP has published its full response to the 2017 Law Commission report, Pension funds and social investment. The FCA intends to consult on a single package of rule changes relating to the Government’s suggested changes in the first quarter of 2019.
EMIR – new requirements to the exchange variation margin relating to derivatives applied from March 1, 2017. If an investment manager uses over the counter derivatives, schemes should check that arrangements are in place for trustees to comply with the new regime. A further EMIR temporary exemption extension for pension scheme arrangements applied to August 16, 2018 and has now expired. On August 8, 2018, the European Securities and Markets Authority (ESMA) published an updated communication on clearing and trading obligations for pension scheme arrangements (PSAs).
ESMA is aware of the challenges that certain PSAs would face to start clearing their OTC derivative contracts and trading them on trading venues on August 17, 2018. With two extensions already granted, there is no possibility of further extending the temporary exemption. However, as there is not yet a suitable technical solution, the European Commission's May 2018 legislative proposal to amend EMIR (known as the EMIR Refit Regulation) includes a further extension of the temporary exemption for PSAs. The positions adopted by the European Parliament and the Council of the EU on the EMIR Refit Regulation appear to support the view that a further extension of the temporary exemption is necessary.
Negotiations on the EMIR Refit Regulation have not finished, and the resulting text is not expected to start applying by the time the temporary exemption applies. This means there would be a timing gap during which PSAs would need to start clearing their derivative contracts before they are, once again, no longer required to do so.
During the limited period of time that the temporary exemption does not apply, ESMA expects national competence authorities not to prioritise their supervisory actions towards entities that are expected to be exempted again in a relatively short period of time. They should generally apply their risk-based supervisory powers in their enforcement of applicable legislation in a proportionate manner.
The Pension Schemes Bill 2017 received Royal Assent on April 27, 2017. The legislation is concerned principally with provisions relating to the authorisation of master trusts. The new regime for master trust regulation, upon which the Government’s response to the consultation is awaited, is likely to be brought fully into force on October 1, 2018.
The DC scheme Chair’s annual governance statement must be completed within 7 months of the end of the scheme year. For example, schemes with a 31 March year end must submit the statement by October 31, 2018. TPR issued trustee guidance on the statement in November 2017 and the guidance was updated in June 2018.
IORP II – the expected transposition date is January 12, 2019.
Brexit should be achieved by March 29, 2019. The UK will then leave the EU from the effective date of withdrawal agreement or, failing that, 2 years after giving Article 50 notice unless European Council and UK unanimously decide to extend period.
New regulations - DC bulk transfers without member consent – the Occupational Pension Schemes (Preservation of Benefit and Charges and Governance) (Amendment) Regulations 2018 came into force on April 6, 2018. The easements are the removal of:
- the need to obtain an actuarial certificate stating that the transfer credits in the receiving scheme are broadly no less favourable than the rights to be transferred Coming into force October 1, 2019, to allow current transfers time to complete); and
- the requirement for there to be a scheme relationship.
New regulations – the Occupational Pension Schemes (Administration and Disclosure) (Amendment) Regulations 2018 came into force April 6, 2018, setting out new requirements to improve transparency on DC benefit costs and charges to members. They do not apply to DB schemes providing only DC AVCs. Members must be provided with access to information via a website with 7 months of the scheme’s year-end date – meaning the earliest date is November 6, 2018, for schemes with year-end April 6,2018.
VAT – HMRC’s existing practice on VAT and pension schemes is to continue indefinitely. Employers should consider taking steps to preserve (or enhance) their pensions-related VAT cover.
Auto-enrolment – cyclical re-enrolment now applies within a 6-month window related to the employer’s staging date. e.g. employers with a July 1, 2015, staging date must complete the cyclical re-enrolment process between April 1, 2018, and September 30, 2018. Total minimum contributions were increased to 5 per cent (of which minimum employer contribution of 2 per cent) from April 6, 2018. Total minimum contributions will increase to 8 per cent (of which minimum employer contribution of 3 per cent) from April 6, 2019.