Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of occupational pensions.

This week we cover topics including: pensions-related announcements in the Autumn Budget and Spending Review; a progress update from the Pensions Dashboards Programme; and a new climate adaptation report from the Pensions Regulator.

• Autumn Budget and Spending Review: pensions-related announcements
• Dashboards: progress update
• TPR publishes new climate adaptation report
• DB master trusts: new industry information regime
• New FRC publications on mandatory TCFD reporting by companies
• FCA publishes rules on new Long Term Asset Fund
• TPR’s powers and policy in practice: what do the new criminal offences mean for you? – recording now available

Autumn Budget and Spending Review: pensions-related announcements

The Autumn Budget and Spending Review contained a few pensions-related announcements, but no widespread changes to the pensions tax framework:

• Charge cap: the government will shortly consult on further changes to the regulatory charge cap for DC schemes to ‘unlock institutional investment to support some of the most innovative businesses’. This is the latest step in a series of government measures aimed at facilitating investment by pension schemes in ‘productive’ investments (including illiquids), and follows recent recommendations by the Productive Finance Working Group: read the recommendations.
• Pensions tax relief – top-up for low earners: in 2025/26, the government will introduce a system to make 20% direct top-up payments to low-earning individuals saving in a pension scheme using a net pay arrangement (HMRC will identify and contact individuals, who would then have to supply further details to HMRC for the top-up to be paid). This would apply in respect of contributions made in 2024-25 onwards, and is being implemented in response to the disparity of treatment between low earners contributing to net pay vs relief at source arrangements. The government will legislate for this in a future Finance Bill. Further details are contained in the government’s response to a call for evidence on pension tax relief administration: read the response.
• Increases to the National Minimum Wage and National Living Wage: these will be increased from April 2022; employers with salary sacrifice arrangements should review whether any changes are required in respect of their workforce.
• Discovery assessments: tax legislation will be amended to remove uncertainty about whether HMRC may use discovery assessments to recover certain tax charges (including in relation to pensions): read more.

Read the Budget and spending review paper.

Other materials published to accompany the Budget, ahead of the publication of the Finance Bill next week, confirm that the government is also proceeding with these previously announced measures:

• The increase to normal minimum pension age from 2028: read more.
• Changes to the scheme pays facility, in respect of annual allowance charges: read more.
• Changes to tax legislation in connection with the McCloud remedy for public service pension schemes. Further details have now been announced: read more.

Read the Autumn Budget 2021: overview of tax legislation and rates.

Dashboards: progress update

The Pensions Dashboards Programme (PDP) has published a progress update on the rollout of pensions dashboards, plus an accompanying blog post. The report summarises key steps the PDP has taken over the past six months, plus ongoing and upcoming work. An initial testing phase will run from December until June 2022; this will be followed by further testing phases.

The PDP continues to urge data providers (including pension schemes) to take preparatory steps, including considering data quality and how they will connect to the dashboard ecosystem. Some feedback to the PDP’s call for input on the proposed approach to staged onboarding stated that the timeline for rollout was too ambitious, especially given the current lack of clarity about the specific requirements and technical framework. The government and the Financial Conduct Authority (FCA) are expected to consult in the coming months on specific requirements for dashboards, including the approach to onboarding.

Read the progress report.

Read the blog post.

TPR publishes new climate adaptation report

The Pensions Regulator (TPR) has published a new climate adaptation report setting out the risks from climate change that it considers are the most relevant to occupational pension schemes, and the approaches TPR is taking to address these both as a regulator and an organisation. This coincides with the publication of reports by other regulators; TPR, the FCA, the Prudential Regulation Authority and the Financial Reporting Council (FRC) have published a joint statement on the reports: read the statement.

Earlier this year TPR published a climate strategy, and it is due to publish the final guidance on its approach to regulating the new climate change-related duties introduced under the Pension Schemes Act 2021 – you can read more about these at Sustainability and UK pension schemes: Preparing for the new TCFD requirements.

TPR’s latest report contains an analysis of scheme practices: the key takeaway is that TPR is concerned that too few schemes give proper consideration to climate-related risks and opportunities, and that ownership of stewardship policies is too limited. TPR expects trustees to be considering climate change in their scheme’s investment strategies, and to allocate sufficient time and resources to assessing and managing financial risks and opportunities associated with climate change. The findings are based on research conducted in 2020; the picture is likely to be changing rapidly as larger schemes comply (or prepare to comply) with new climate-related governance and reporting requirements.

Read the report.

Read TPR’s press release.

DB master trusts: new industry information regime

The Pensions and Lifetime Savings Association (PLSA) has launched a new ‘self-certification’ regime for multi-employer DB master trusts. The PLSA plans to issue templates for DB master trusts to provide information about their arrangement, with completed certificates to be published on the PLSA website. This is intended to help trustees and employers who may be considering DB master trusts to understand the key features of the arrangement (but are not intended as a replacement for an appropriate due diligence process). The templates were designed by an industry working group set up by the Department for Work and Pensions.

Read more about the certificates.

New FRC publications on mandatory TCFD reporting by companies

The FRC has published new materials on reporting by premium listed companies against the Taskforce on Climate-related Financial Disclosures recommendations (TCFD reporting):

• A report to help companies prepare for mandatory TCFD reporting, which includes practical advice and examples: read the report.
• A snapshot of the status of current reporting against the TCFD framework in the UK: read the snapshot.
• Research on climate-related scenario analysis, including approaches that have been adopted by companies, typical challenges, good practice, and common steps taken to conduct the analysis: read the research.

These materials may be of interest to trustees considering their approach to climate-related investment governance and disclosure issues, including investment stewardship.

FCA publishes rules on new Long Term Asset Fund

The FCA has finalised its rules for a new type of authorised fund, the Long Term Asset Fund (LTAF). The LTAF is aimed at facilitating investment in long-term, illiquid assets, including productive finance assets, and is one of a number of measures that the government hopes will assist DC pension schemes that wish to invest in these types of assets. The FCA is encouraging firms considering making an authorisation application for an LTAF to engage with it prior to submitting an application. The PLSA has produced a guide for trustees on LTAFs: read more.

Read about the new LTAF rules.

TPR’s powers and policy in practice: what do the new criminal offences mean for you? – recording now available

The recording of our webinar ‘TPR’s powers and policy in practice: what do the new criminal offences mean for you?’ is now available online: click here to watch.

In this webinar our experts Jennifer Marshall, Neil Bowden, Andy Cork and Eve Giles discussed:

• what do the new criminal offences mean in practice for banks and other lenders, private equity investors and corporates?
• what impact will they have on restructuring activity (in distress scenarios and otherwise)?
• what are the practical implications for risk management and due diligence?