The pace of change is unlikely to slow down in 2020, with new powers for the Pensions Regulator, a revised scheme funding code of practice and further developments in relation to GMP equalisation all on the horizon. Our top predictions for UK pensions law in 2020 are below, with links to further information where available.
Stronger Pensions Regulator powers
We expect the Pension Schemes Bill (see above) to be re-introduced following the Conservative’s general election win. It includes significant changes which, if enacted, could have far-reaching consequences for sponsoring employers and trustees of DB pension schemes.
Further developments in relation to GMP equalisation are expected in 2020, including guidance from HMRC and another Court hearing in the Lloyds case, this time looking at the extent of trustees’ obligations to revisit past transfers-out. For many trustees, GMP equalisation projects are likely to start in earnest in 2020.
Two Regulator consultations on scheme funding are expected in 2020: the first consultation is expected early in 2020 and will focus on options for a clearer framework for DB funding. Later in 2020, a second consultation is expected on a draft code of practice.
From 1 October 2020, trustees will be required to update their statement of investment principles (SIP) to include their policy on arrangements with asset managers and their policies in relation to capital structure, conflicts of interest and other stakeholders. Trustees of DB schemes will also need to publish their SIP and produce an implementation statement. Read more here. Further changes could be introduced following a consultation in 2019 on proposals which aim to encourage DC schemes to consider a wider range of investments. The proposals included a requirement for larger DC schemes to explain their policy in relation to investment in illiquid assets in their SIP and for smaller DC schemes to explain their assessment of whether it would be in members’ interests to be transferred into another scheme with significantly more scale. Read more here.
Future of RPI
The government has said it intends to consult in January 2020 on whether RPI should be aligned with CPI including owner occupiers' housing costs (CPIH) at a date other than 2030 (when the Chancellor's consent to this change will no longer be required) and, if so, when between 2025 and 2030. If this change is made, it will have an impact on the level of increases received by members of schemes which continue to use RPI – and, consequently, on the funding position of such schemes. Read more here.
In October, the government published a consultation on proposed changes to the rate of the general levy payable by occupational and personal pension schemes. The consultation sets out a range of options, with schemes likely to face an increase of at least 10% of 2019/20 rates on 1 April 2020. Read more here.
In August, the government responded to its consultation on changes to the Pensions Ombudsman's processes and jurisdiction. This confirmed that an early resolution
function within the Ombudsman’s remit would be introduced. We expect this to be progressed in 2020. Read more here.
Pension costs and transparency
In November, the government responded to the Work and Pensions Committee's inquiry into pension costs and transparency. Amongst other things, it confirmed that the government will review the level and scope of the charge cap in 2020, as well as consulting on whether, and if so how, investment pathways should be applied to trust-based DC schemes. Read more here.
DB consolidation / superfunds
Although DB consolidation / superfunds were a notable omission from the Pension Schemes Bill, we are expecting a new legislative framework for the regulation of DB superfund / consolidation schemes at some point following a consultation which closed in February 2019.
Single code of practice
The Regulator has said it is planning to combine the content of its 15 current codes of practice to form a single, shorter code. Its intention is to develop the new code in phases, with its early focus being on the codes most affected by the regulations that implement the EU pensions directive (known as IORP II).
Professional trustee standards
In February, the Association of Professional Pension Trustees published standards for professional trustees of occupational pension schemes. The standards apply to anyone falling within the Regulator's description of a professional trustee. An accreditation framework is expected to be launched in 2020. Read more here.