A Recipe for Success – Dishing Up Pensions Dashboards

By Lynn Housecroft on July 20, 2022 Posted in UK Pensions

Close up on hand of a Chef decorating a beautiful plate at a fancy restaurant

How do you succeed in serving up pensions dashboards to scheme members? It is a bit like creating a complicated recipe. You know how you want your dish to look and taste, but how do you get there?

First, the ingredients have to be listed. Second, the method has to be tried and tested (and it also has to be simple, if you want domestic cooks to follow it, as well as master chefs). Thirdly, the dish has to be cooked to perfection and presented in a way that looks appetising.

How far have we got with cooking up a dashboards recipe?

1. Ingredients

The list of dashboards ingredients is almost complete. Last week, the Department for Work and Pensions (DWP) published a lengthy response to its consultation on the draft regulations and, with 100 responses, it had a lot to weigh up. The DWP has now agreed a few adjustments to the basics. The summary document highlights the key changes, which include extensions to connection deadlines for large master trust schemes, large money purchase schemes used for automatic enrolment, hybrid schemes and public service pension schemes. The response also confirms changes to the value data that schemes are required to return to pensions dashboards and a modified stance for schemes in a Pension Protection Fund assessment period and for schemes in wind-up.

Before the draft legislation is finalised, the DWP needs to consider responses to its second consultation and, in particular, any comments around how much notice the secretary of state should give before dashboards are made available to the general public (the “Dashboards Available Point”). The consultation suggested that 90 days is appropriate, but this is proving controversial, with many saying that far more notice is needed to allow administrators and pension providers to be equipped to deal with the expected increase in work.

2. Method

A number of renowned chefs are working together to establish what to do with all of the ingredients. The DWP, The Pensions Regulator (TPR), The Financial Conduct Authority (FCA), the Pensions Dashboards Programme (PDP) and the Money and Pensions Service (MaPS) are collaborating and working in conjunction with other interested parties and volunteers. We hope that many chefs will make light work – the PDP indicated in its last update report that all parties are pulling together and are on track in terms of their individual responsibilities.

TPR issued its initial guidance last month. This includes expectations that trustees will have a compliance plan in place and will be discussing dashboards at trustee board level and with advisers. I commented on this in my previous blog, ASAP x 10. TPR is encouraging trustees, administrators and scheme managers to join its webinar on 28 July at 2.30pm.

Yesterday, PDP threw its dashboard standards into the mix for consultation. This covers the technical and operational detail underpinning the dashboards legislation. The consultation runs for 6 weeks and the PDP is staging a series of webinars to help stakeholders digest the detail.

3. Cooking and Serving

For many reasons, it is vital that dashboards succeed. The ultimate taste-testers are the general public and the pensions information that is presented to them needs to be palatable. The pensions industry has a great deal of expertise to offer in terms of what constitutes successful member communications, and hopefully the PDP’s call for input on design standards (i.e. how the dashboards will look) will receive many constructive responses. We all know that it can be tricky to get the point across that information is purely for “illustrative purposes” without caveating the life out of it.

Continued engagement from the pensions industry is vital – nobody wants the soufflé to sink after all the hard work that has gone into this project.

Dessert?

In terms of next steps, the DWP plans to lay the regulations before parliament this autumn. We can expect a flurry of activity after this, including consultations on TPR’s compliance and enforcement policy, on FCA rules and on MaPS standards.

Do we have a recipe for success? The proof is in the pudding. Personally, I feel optimistic.

The opinions expressed are those of the author and do not necessarily reflect the views of the Firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

ASAP x 10 – TPR Puts The Dash Into Pensions Dashboards

By Lynn Housecroft on June 24, 2022 Posted in UK Pensions

The Pensions Regulator (TPR) is not pulling any punches in its latest messaging around pensions dashboards.

The Deadline campaign, launched on 22 June 2022, follows research conducted by TPR revealing that insufficient progress has been made by schemes in preparing for pensions dashboards and moving towards the level of digitalisation of member records that will be required. The research shows that 63% of schemes have not yet discussed dashboards at trustee board level. 63% seems like a lot. Hopefully, none of the 63% are those with staging dates in 2023 – otherwise time is in short supply if compliance is going to be a smooth process.

TPR’s initial guidance, based on draft regulations issued by the DWP, summarises what it expects trustees to do. If you have a basic familiarity with dashboards, the guidance is a fairly quick read. Importantly, it sets out a checklist/timetable for compliance. If there is already a plan in place for your scheme, it would be a good idea to check this against TPR’s action plan, to see if there are any gaps or mismatches in terms of timeframes. If your scheme does not yet have a plan, now would be a good time to reassess this.

Sharia Law Considerations for Pension Trustees and Employers

By Kirsty McLean on May 30, 2022 Posted in UK Pensions

Each year, I have a profound respect and admiration for colleagues and friends who have fasted during Ramadan. It is a very public demonstration of their faith, which clearly also has tremendous personal significance. I was particularly struck this year how LinkedIn was full of supportive comments and suggestions how employers might support those fasting.

Are there steps that employers – and trustees – can take to support Muslim employees and members from a pensions perspective? Indeed, is there a positive obligation to do so?

Down to the Wire!

By Keshinda Gage on May 17, 2022 Posted in UK Pensions

Frustrated computer user

On 28 April 2022, at 4:35 pm we issued legal advice to our client regarding the GMP conversion exercise for two schemes, along with final versions of the deed of amendment to bring into effect GMP conversion; the Conversion Date was set for 1 May 2022. At 4:43 pm, we get an e-mail from our professional support lawyer stating that the Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill, a private member’s bill proposing further changes to the GMP conversion legislation, has just received Royal Assent and is now the Pension Schemes (Conversion of Guaranteed Minimum Pensions) Act 2022; “all those currently advising on GMP conversion should take note!” Talk about bad timing! As the reader will be aware, GMP conversion projects require months of planning and negotiations between advisers, trustees and employers. Would the changes introduced by the Act be in force on 1 May?! Would we have to update our legal advice? Could the deeds still be signed?! Would we have to send out new communications to members?

Getting to Net Zero: Lessons from Butler-Sloss v the Charity Commissioners & the Attorney General for Pension Schemes

By Clifford Sims on May 9, 2022 Posted in UK Pensions

Majestic-polar-bear-touching-sea-surface

Once in a while trustees get frustrated with what the law appears to tell them is their fiduciary duty. If they can afford it, trustees can resolve such ambiguities or uncertainty by getting a ruling from the courts as to how to interpret their duties. This is what two sets of charitable trustees recently did in relation to an area of keen interest to pension trustees: how can one implement an investment strategy that is based on a commitment to align with the Paris Agreement on climate change (in keeping with a charitable purpose that expressly included environmental protection), which would inevitably mean excluding a significant part of the investment universe, without sacrificing financial returns to the trust?

JEG or ALAPBAMAN? How Much is Enough for Pensions Single Code Compliance?

By Lynn Housecroft on April 27, 2022 Posted in UK Pensions

Plan B

From memory, the term “good governance” started to be widely used in the pensions industry at around the same time that the Pensions Act 2004 came into force. At first, it was a bit of a nebulous concept that could have been loosely described as 1. Complying with the requirements and expectations of The (then new) Pensions Regulator (TPR) and 2. A dollop of good practice on top.

Immediately post Pensions Act 2004, clients commonly asked what other clients were doing, as they wanted to benchmark themselves – i.e. they wanted to “do enough governance” without the scheme budget running away. The acronyms “JEG” and “ALAPBAMAN” were used (“Just Enough Governance” and “As Little As Possible But As Much As Necessary”). Continue Reading

The Big Reveal: Corporate Transparency and What It Means for Pension Scheme Trustees

By Daniel Colman on March 16, 2022 Posted in UK Pensions

Modern glass architecture

Background

In February 2022 the UK Government unveiled its long-awaited plans to improve corporate transparency and reform the company register framework, in a move widely regarded as having been accelerated (at least in part) in response to the conflict in Ukraine. In this blog, we look at how the changes could affect UK pension scheme trustees.

Planned Legislative Reform

In summary, the proposed changes that pension scheme trustees should monitor closely are as follows.

Companies will be allowed a maximum of one “layer” of corporate directors, which must be based in the UK, and the natural persons directing each corporate director will be subject to identity verification.
Companies House will take on more of a regulator’s role – it will review and query information that is submitted, with individuals who fail to verify their identity or comply with new requirements under these reforms becoming subject to new criminal and civil sanctions.
Anyone wishing to make a filing at Companies House, alongside all company directors and persons with significant control, must verify their identity using photographic identification.

DOL Crypto Guidance Heeds Strong Warning to Retirement Plan Sponsors Looking to Add Digital Asset Investments to Retirement Plan Lineups

By Joe Yonadi and Caitlin Steiner on March 14, 2022 Posted in Benefits, Employee benefits, US

Directly on the heels of the Biden Administration’s digital asset Executive Order issued on March 9, 2022[1] (Executive Order), the U.S. Department of Labor (DOL) published its own guidance on the use of cryptocurrencies as a 401(k) plan investment in Compliance Assistance Release No. 2022-01 (CAR). The DOL guidance is not limited to crypto, but advises plan fiduciaries regarding all digital assets, including Ethereum, tokens, and other derivations thereof.

Ominous Warning – Duty of Prudence & Personal Liability at Stake

The DOL CAR is nothing short of an ominous warning for plan fiduciaries. Similar to the Executive Order, the DOL CAR highlights that there are many risks involved when offering cryptocurrencies or other digital assets as plan investment options. In light of these risks, the DOL CAR “cautions plan fiduciaries to exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu for plan participants.”

The DOL CAR reminds plan fiduciaries of their obligations under Section 404 of the Employee Retirement Income Security Act of 1974 (ERISA) when assessing crypto or digital asset investments stating that retirement plan fiduciaries must act solely in the financial interest of plan participants, and the duty of prudence and loyalty obligations are the highest known to the law. It further reminds fiduciaries of their obligations associated with retirement plan investments and the potential for personal liability for plan losses if they breach these fiduciary liabilities. Again, by restating ERISA’s fiduciary duties and the liability associated with any breach of such duties, the DOL CAR appears to be flashing red light warning signs that any retirement plan fiduciary that dares enter the digital asset realm and pushes forward a crypto retirement plan investment could be subject to the most severe consequences under ERISA.

Duty of Ongoing Monitoring

The DOL CAR very timely applies the recent Supreme Court holding on retirement plan investments in Hughes v. Northwestern and Tibble v. Edison by reiterating that the duty of prudence does not merely include selecting investments, but also extends to the duty to monitor the investments selected on an ongoing basis; any failure to remove an imprudent investment option is a breach of such duty.[2]

Serious Concerns around Crypto Investing

Keeping on point with the Administration’s Executive Order, the DOL CAR further warns that because cryptocurrency is in its nascent stages, the DOL “has serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies,” or any other similar investment products. The DOL believes that any such investment poses significant risks to participants’ accounts, including risks of fraud, theft, and loss.

In particular, the DOL highlights the following areas of concern for retirement plan fiduciaries:

Investments in cryptocurrencies are highly speculative due to the extreme pricing volatility caused by the uncertainties associated with crypto valuations, according to the Securities and Exchange Commission.
Cryptocurrencies are capable of being promoted and attracting plan participants with little knowledge of investing who expect high investment returns but have insufficient knowledge of the potential downside related to such highly volatile crypto investments.
There are significant custodial and recordkeeping concerns, as the loss of a password could result in the complete loss of a cryptocurrency asset.
Cryptocurrencies carry a risk of unreliable valuation, with inconsistent accounting treatment.
Cryptocurrencies may impose a regulatory burden since the cryptocurrency markets are evolving, and including cryptocurrencies as 401(k) investment options would expose plan fiduciaries to the potential liability of entering into unlawful transactions with inadequate disclosures for participants.

The DOL CAR concludes by stating that its employee benefits arm, the Employee Benefits Security Administration (EBSA) will conduct an investigative program directly aimed at plans that offer crypto and other digital asset investment. As part of the investigative program, the EBSA will take appropriate action to protect the interest of plan participants, including the questioning of plan fiduciaries who include such investment options through brokerage windows as to how they “square their action with their duties of prudence and loyalty.”

[1] Exec. Order on Ensuring Responsible Development of Digital Assets (March 9, 2022), https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/09/executive-order-on-ensuring-responsible-development-of-digital-assets/.

[2] Hughes v. Northwestern Univ., 142 S. Ct. 737, 742 (2022); Tibble v. Edison Int’l, 575 U.S. 523, 530 (2015).

Target Date Fund Performance Litigation – Advice for Plan Fiduciaries

By Gregory Viviani and Caitlin Steiner on February 17, 2022 Posted in Benefits, Employee benefits, US retirement plans

Retirement Jar In recent years, there have been more than 150 lawsuits alleging violations of ERISA[1] fiduciary obligations that are based on “excessive fees” being charged to participants in defined contribution retirement plans.

A more recent trend also seems to be focusing on the investment performance of target date funds. This Post discusses that litigation trend, and offers some practical advice to employer investment committees or other plan fiduciaries.

Pensions Dashboards – It Is Getting Real

By Kirsty McLean on February 15, 2022 Posted in UK Pensions

Pension Pounds As a consumer, I am a big fan of the concept of dashboards. A brilliant idea. As a lawyer advising pension plan trustees, I am looking forward to helping my clients to make them a reality. Until now, dashboards have felt a long way off in the future and there has been no shortage of pressing work to do (Guaranteed Minimum Pension equalisation anyone?). However, we received a lot more information with the publication of the DWP’s consultation on 31 January – 137 pages’ worth.

Given the evident complexity, I have to say that recent criticism levelled on the pensions industry for not having taken action voluntarily feels a bit harsh. The investment is huge in terms of both time and money and personally I believe it is unrealistic to think that dashboards could ever have come to fruition without compulsion.

There is a lot to digest as we prepare Squire Patton Boggs’ detailed response to the consultation but here are a few immediate thoughts on the proposals: Continue Reading