From asset pooling and actuarial valuations to administration and data, local government pension schemes have a lot to think about this year – meaning good governance is more important than ever. In this podcast episode recorded for Pensions Expert, Kirsty Bartlett, partner in our Pensions team, and Ian Colvin, head of LGPS Benefits and Governance at Hymans Robertson, discuss potential conflicts of interest, pressure on fund resources and the importance of focusing on administration.
Brexit insolvency issues for trustees of pension schemes with overseas sponsors
You might remember that before 2016, in the world before the EU referendum (which did exist!), it was effectively not possible for the insolvency of an overseas sponsor of a UK pension scheme to trigger entry into the PPF unless the overseas sponsor had a branch or office (an “establishment”) in the UK (for legal geeks you might remember this was the issue discussed in the Olympic Airlines case which was heard by the Supreme Court in 2015).
Following the Olympic Airlines case, in 2016 the PPF entry regulations were amended so that trustees can trigger entry into the PPF where an overseas sponsor with no “establishment” in the UK is unlikely to continue as a going concern.
Problem solved? Well, Brexit might yet throw a spanner into the works (and it might not be the last time that sentence is written…). Continue Reading
Are you a professional trustee of an occupational pension scheme? If so, you will soon be expected to apply for accreditation and demonstrate that you meet a new set of standards.
The Professional Trustee Standards Working Group recently published details of a proposed accreditation framework for professional trustees. This follows on from a consultation which concluded in March 2018.
Does your DC scheme have less than £10m in assets or fewer than 1,000 members? If so, you may have to consolidate into another arrangement – or explain why you should not. The encouragement of DC consolidation is one of the proposals in the DWP’s consultation “Investment Innovation and Future Consolidation”, which runs until 1 April 2019.
The consultation focuses on two objectives for trust-based DC schemes in the UK: (1) enabling them to choose to include more illiquid investments in their portfolios and (2) improving scheme governance. The proposed method for both is greater concentration of assets through consolidation.
According to the consultation, there are around 3,000 trust-based pure DC schemes, 93% of whose assets are concentrated in only 7% of those schemes (being the largest schemes, i.e. with over 1,000 members). The DWP’s proposals are designed to accelerate consolidation of assets and the following methods are put forward: Continue Reading
We may be approaching Valentine’s Day, but the new “Declaration of Intent” to be made by employers to their pension trustees is unlikely to be romantic….
A lot can happen in a year. We’ve had two Royal weddings, a Royal baby, Facebook has been under fire for misuse of personal data, Donald Trump and Kim Jong Un held a summit in Singapore, France won the World Cup and the DWP has been busy considering how best to protect defined benefit pension schemes. In March 2018, the DWP issued its White Paper on “Protecting Defined Benefit Pension Schemes”, which was swiftly followed by various consultations. This included a consultation in June 2018 on strengthening the powers of The Pensions Regulator (TPR). The DWP has now issued its outcome of that consultation. We are pleased to see that many of our own comments which we provided during the consultation appear to have been persuasive. Continue Reading
We are delighted to announce that our award winning HR legal portal “Global Edge” now contains a new special feature on UK pensions law. Global Edge gives instant access (via mobile device or desktop) to a vast array of employment law topics and the latest legal developments in 37 countries plus the EU.
If, for example, you want to know what your employment law obligations would be when purchasing a company that operates in Spain, France, Germany, Malaysia, Romania and the UK, Global Edge will generate a report within seconds comparing the legal requirements for each country. Global Edge also contains a horizon scanner, giving details of all forthcoming developments in employment law, along with access to current news, articles and employment blogs. Continue Reading
Are GMPs getting you down? ‘Tis the season for a lighthearted view of a serious issue. We have set the history of GMPs to verse in our “GMPs Rock” poem, and invite you to reminisce with us.
All the best from the Squire Patton Boggs Pensions Team.
It all began way back in time, in Nineteen Seventy Five
The passing of a pensions act brought GMPs alive.
And in the world of pop music there was a whole new scene
The festive number one that year? A Rhapsody by Queen.
Contracting-out came into force in Nineteen Seventy Eight,
A certificate was needed, and everything was great.
The total savings on NI were really quite a gem.
The yuletide number one back then? A song by “Boney M”.
On August 31, 2018, President Trump issued an Executive Order directing the Department of Labor (DOL) and Treasury Department to take action to “promote retirement security for America’s workers” by, among other things, expanding access to Multiple Employer Plans (MEPs). Specifically, within 180 days of the issuance of the Executive Order, DOL must “consider…whether to issue a notice of proposed rulemaking, other guidance, or both, that would clarify when a group or association of employers or other appropriate business or organization could be an ‘employer.’” Within that same timeframe, the Treasury Department must “consider proposing amendments to regulations or other guidance… regarding the circumstances under which a MEP may satisfy the tax qualification requirements…including the consequences if one or more employers that sponsored or adopted the plan fails to take one or more actions necessary to meet those requirements.”
In response to that Executive Order, DOL on October 23, 2018, published a Notice of Proposed Rulemaking (NPRM) in the Federal Register that “would make it easier for small businesses to offer retirement savings plans to their workers through Association Retirement Plans, which would allow small businesses to band together to offer 401(k) plans to their employees.” Specifically, under title 29 of the Code of Federal Regulations, DOL’s NPRM seeks to clarify the circumstances under which an employer group or association or a professional employer organization (PEO) may sponsor a workplace retirement plan. In particular, the NPRM clarifies that employer groups or associations and PEOs can, when satisfying certain criteria, constitute “employers” within the meaning of section 3(5) of ERISA for purposes of establishing or maintaining an individual account “employee pension benefit plan” within the meaning of ERISA section 3(2). As part of the NPRM, DOL is requesting comments on whether it should address, by regulation or otherwise, whether there are other types of entities that should be treated as an “employer,” within the meaning of ERISA section 3(5), for purposes of sponsoring a MEP. Importantly, the NPRM would apply solely to defined contribution plans.
Under the NPRM, an employer generally would be required to execute a participation agreement or similar instrument that lays out the rights and obligations of the MEP sponsor and the participating employer before participating. However, these employers would not be viewed as sponsoring their own separate, individual plans under ERISA. Rather, the MEP, if meeting the conditions prescribed in the NPRM, would constitute a single employee benefit plan for purposes of title I of ERISA. Consequently, the MEP sponsor – and not the participating employers – would generally be responsible, as plan administrator, for compliance with the requirements of title I of ERISA, including reporting, disclosure, and fiduciary obligations. Continue Reading
The Investment Association has published its annual letter to Remuneration Committee chairs and updated Principles of Remuneration (“Principles”) for the next AGM season. Most of the changes reflect the new UK Corporate Governance Code and the Investment Association (“IA”) has updated the Principles to make them “clearer and sharper”.
That certainly describes the tone taken in the annual letter. The IA makes it clear that companies which fail to respond to shareholder views, or do not take the time to understand those views, will find investors have no choice but to vote against their remuneration proposals. Reflecting the hardening mood on director pay, the IA warns that executive remuneration is a reputational issue for the company, individual Remco members and those executive directors who receive remuneration from contentious arrangements. Any boards still taking the view that pay is a contractual matter only and that fairness in remuneration is a woolly, nice to have, concept have been given a very clear warning that the landscape has changed.
These priorities are clear in the IA’s key issues for the 2019 AGM season, which include:
- Encouraging companies to report their CEO pay ratio in 2019 (even though the new requirements apply from 2020 for most companies), and to adopt Option A as this is the most statistically robust calculation method.
- Highlighting that engagement between Remuneration Committees and investors remains key, although some IA members have found Remuneration Committees are “overly considerate” of the management perspective and so do not give sufficient weight to the views of investors.
- Making clear that shareholder consultations should be a genuine process of obtaining shareholder views on a company’s complete remuneration structure (not just proposed changes) and not a validation exercise.
- Reiterating that “ordinary pension savers” want to understand why investors support remuneration pay-outs, and so investors must be able to link pay and performance through transparency on financial and non-financial targets in order to justify their support.
The key changes to the Principles mostly reflect the new UK Corporate Governance Code. In summary: Continue Reading
The benefit of hindsight is a wonderful thing. The benefits of a fully functional crystal ball to see the future would be much better. All pensions lawyers (and scheme actuaries) would add it to their gift list!
I will attempt to take a look at the pensions related announcements in Monday’s budget from a future (perhaps optimistic) vantage point.
So here we are, nearing the end of 2023…
Five years ago, in October 2018, Philip Hammond, Chancellor of the Exchequer, announced £5m support for the pensions dashboards (note the plural) project with the statement “The government is taking steps to support the launch of the Pensions Dashboards, innovative tools that will for the first time allow an individual to see their pension pots, including their State Pension, in one place….DWP will work closely with the pensions industry and financial technology firms.”
Many doubted that this would ever get off the ground – but yet I see myself in 2023, asking my smart-watch to show my latest pension figures – whilst my children laugh at the fact that I still find this a novelty. Continue Reading