Pensions update – 2017
What does the election result mean for pension schemes and should trustees be taking action?
The volatility of the market takes it toll on investment performance, but how can you predict the market? Certainly many fund managers weren’t expecting the EU referendum to go the way it did, Trump to be elected and the uncertainty of the recent election result which surprisingly resulted in a strengthening of the pound amongst the chaos of the result. Investments are long term vehicles and I would expect that advice from Investment Managers will remain largely unchanged as a result of this.
For state pensioners, the threat of the expensive triple lock guarantee being removed appears to have been put on the back burner until 2020.
The proposed plans for increasing retirement age will affect schemes with a state retirement age, and consequently scheme deficits.
A new pensions minister was appointed: David Gauke – Secretary of State for Work and Pensions on 11 June 2017, but what changes will he bring about? Is the annual allowance safe?
The FRC have issued FRED67 for consultation. The consultation ran until 30th June 2017 with a final standard expected in December 2017. Following the triennial review, we are expecting a review of the Pensions SORP to dove tail with this.
PRAG have stated “When FRS 102 was issued in March 2013 the FRC indicated it would be reviewed every three years. The first triennial review is now in progress. The FRC is keen to hear stakeholders’ views on possible improvements to FRS 102 and there will be a number of opportunities for stakeholders to comment.”
It is expected that a revised SORP will be issued in summer 2018 with the next revision scheduled for 2020/21.
Data Protection Laws and Cyber Security
On the back of the introduction of GDPR next year, which replaces the data protection directive from 1995, the Regulator are advising that all schemes should raise the issue of cyber security at their next trustee meeting.
The Regulator has stated in guidance that you should work with your administrators to ensure the right controls are in place, including controls to protect against cyber security threats. This includes ensuring that anyone with access to scheme and member records is suitably vetted and trained, and requiring administrators to have measures in place to avoid any security breaches (including cyber attacks) and data losses, and a plan for dealing with these and keeping you informed if they do occur.
Trustees are responsible for protecting information and cyber security should be embedded into the internal control processes. The new GDPR rules apply from 25th May 2018.
‘IORP II’ as it is known was finalised in January 2017 and implementation is required by 12 January 2019. It focuses on the governance of pension schemes and their communications with members. The revision is extensive with the number of articles rising from 24 to 67.
Key changes are:
A requirement to draw up and maintain a risk assessment
The appointment of a risk management function and an internal auditor.
Documentation of a remuneration policy for key function holders
Revisions to the content of annual pension benefit statements