Pensions snapshot - February 2022
This edition of snapshot looks at the latest legal developments in pensions.
The government is currently consulting on draft regulations which set out the detailed framework for the provision and operation of the pensions dashboard service. A pensions dashboard will be an online platform that can be used by scheme members to access information about all of their occupational pension schemes (including the State Pension) in one place. The hope is that the pensions dashboard service will allow members to keep track of, and become more engaged with, their pension schemes.
The first pensions dashboard will be developed by the Money and Pension Service. This is being established under a separate process to that set out in the draft regulations and the result will be a non-commercial dashboard.
The draft regulations also have scope for commercial dashboard providers to enter the market. In an approach similar to that taken to automatic enrolment, if a commercial provider wishes to establish a pensions dashboard, it will need to become a "qualifying pensions dashboard service" by meeting the standards and requirements set out in the draft regulations and supplementary guidance.
The requirement for an occupational pension scheme to onboard to a pensions dashboard will apply to registrable UK based occupational pension schemes with active and/or deferred members (including public service schemes). Pensioner members are outside the scope of pensions dashboard requirements as are personal pension schemes, which will be covered by a similar regime governed by the FCA (see below).
Given the scale of the project, schemes will be required to onboard in a phased manner. The draft regulations contain the following timelines:
Compulsory staging date
Size (pensioner members not included)
April 2023 – September 2024
1000+ relevant members
Priority order for this stage will be:
Two: Medium schemes
October 2024 – October 2025
100 to 999 relevant members
Relevant occupational pension schemes
Three: Small and micro schemes
Not covered by regulations, but expected to stage from 2026
99 or fewer relevant members
The timing for these schemes will be set out in future regulations
It is worth noting that the Pensions Regulator has been given enforcement powers under the draft regulations.
Although the regulations are currently in draft form, trustees (especially of larger schemes) should be working on ensuring that their scheme data is complete and accurate and that the data meets the expected standards required under the new dashboard regime.
The FCA recently published its consultation paper on pensions dashboards which sets out proposed new rules for regulated pension providers. The FCA proposals relating to pensions dashboards include requiring pension providers to be prepared to find pension records and supply specified information for consumers to view on their dashboard.
The FCA is accepting feedback on its proposals until 8 April 2022. The feedback provided will inform the final FCA rules in relation to Pensions Dashboards and those should then be confirmed in Autumn 2022.
The consultation includes an implementation deadline of 30 June 2023. Certain providers may rely on the later implementation deadline of 31 October 2024 but, if they intend to do that, they must notify the FCA by 30 April 2023.
Mr S was a deferred member of the Armed Forces Pension Scheme 1975. He applied for early payment of his deferred pension on the grounds of ill-health in 2012 on the basis that a hip condition meant he was unable to stand for more than five minutes and could only work part-time. His application was rejected - the administrator concluded that he was not permanently incapable of full-time employment.
Mr S successfully appealed to the Pensions Ombudsman in 2016 and the administrator was directed to reconsider the application. After contacting Mr S's medical practitioners for clarification of their earlier reports, the administrator reconsidered the application in 2016/17 and rejected it again.
In 2021, Mr S complained to the Ombudsman about the reconsideration and the Ombudsman upheld his complaint. The Ombudsman determined that, since the administrator had been directed to reconsider Mr S's application, it was required to make a retrospective decision without considering new evidence relating to Mr S's health after 2012 and without applying the benefit of hindsight. It was apparent that the administrator had taken account of post-2012 evidence, such as whether Mr S was currently receiving medical help. In addition, the administrator should have clarified to Mr S's medical practitioners that their opinion should have been based on what Mr S's capacity for full-time employment would have been in 2012.
The Ombudsman concluded that the decision to decline Mr S's application had not been made in a proper manner and that this therefore constituted maladministration. The administrator was directed to reconsider its decision and pay Mr S £500 for the non-financial injustice caused by the flawed decision-making process.
This complaint highlights the issues that can arise when a scheme is required to reconsider a member's application. The scheme must ensure it bases the reconsideration on evidence which would, or could, have been available at the time of the original application and that it does not draw on the benefit of hindsight.
The Occupational Pension Schemes (Charges and Governance) (Amendment) Regulations 2022 (SI2022/10) (the Regulations) will come into force on 6 April 2022. The Regulations prohibit the imposition of flat fees by trustees and managers of occupational pension schemes used for automatic enrolment where the value of a member's rights under a default arrangement is below £100.
As a result of these amendments, the following will apply in a scheme's first charging year which ends after 6 April 2022:
- A flat fee charge may not be imposed where the value of the member's rights under a default arrangement is £100 or less.
- If the value of the member's rights is more than £100 under a default arrangement, a flat fee charge may be imposed to the extent that it does not reduce the value of the member's rights to less than £100.
- Where more than one flat fee charge is imposed on a member's rights under a single default arrangement in the same charges year, the value of the member's rights under the default arrangement must be restored to what it would have been had only one flat fee charge been imposed.
The Department for Work and Pensions has updated its non-statutory charge cap guidance to reflect this restriction. This can be found here.
Trustees and managers should check that processes are in place to ensure that a flat fee charge is not imposed where it is inappropriate to do so.