More change is expected in 2019, with new powers for the Pensions Regulator, a revised scheme funding code of practice, a new authorisation and supervision regime for DB consolidators, a legislative framework for collective defined contribution (CDC) schemes and the development of a pensions dashboard all on the horizon.
A response to the consultation on strengthening the Regulator's powers is expected in 2019. More broadly, the Regulator has recently trailed a new regulatory approach, with an emphasis on significantly more intervention for all schemes and one-to-one supervision for the largest schemes. One-to-one supervision is expected to be rolled out to more than 60 schemes in 2019.
Regulations to bring into force the cross-border and scheme governance provisions of the EU pensions directive (known as IORP II) will come into force on 13 January 2019. Schemes will need to comply with the new duty to establish an effective system of governance. They will also need to carry out and document an own risk assessment. Read more here
The new authorisation and supervision regime for DC master trusts came into force on 1 October 2018. Existing master trusts have until 31 March 2019 to apply to the Regulator for authorisation, or to wind up and exit the market. Read more here
Minimum contributions for auto-enrolment purposes must be increased from a total of 5% of qualifying earnings to a total of 8% of qualifying earnings (with the employer contribution increasing from a minimum of 2% of qualifying earnings to a minimum of 3% of qualifying earnings) from 6 April 2019. Read more here
A consultation on a new scheme funding code of practice is expected in 2019. This is likely to focus on how prudence is demonstrated when assessing scheme liabilities, what factors are appropriate when considering recovery plans and ensuring a long-term view is considered when setting the statutory funding objective.
Subject to Parliamentary time allowing, we are expecting a Pensions Bill in 2019. This is likely to cover a host of significant developments, including the Regulator’s new powers, scheme funding, DB consolidation, CDC schemes and the pensions dashboard.
Investment consultancy and fiduciary management
Following an investigation into the investment consultancy and fiduciary management markets, the Competition and Markets Authority published its final report in December 2018. The CMA found that there is an adverse effect on competition in the investment consultancy and fiduciary management markets from which substantial customer detriment may be expected to result. It has therefore proposed a package of remedies to address these issues, which are expected to be implemented in 2019. Read more here
From 1 October 2019, trustees will be required to consider the impact on their investments of environment, social and governance (ESG) factors, explain the extent to which they take account of members’ views and set out their policies on stewardship. In addition, trustees of DC schemes will be subject to new reporting and disclosure obligations. Read more here
The circumstances in which DC benefits can be transferred without members’ consent were simplified from 6 April 2018. The current process (involving actuarial certification and the scheme relationship test) will no longer be available for transfers between DC schemes without guarantees after 1 October 2019. Read more here