Issues affecting all schemes
Update to Pensions Regulator's COVID-19 guidance
During June, the Pensions Regulator (the "Regulator") updated various pieces of guidance that it had produced to help trustees and sponsoring employers deal with COVID-19.
Changes were made to the Regulator's guidance for sponsoring employers on automatic enrolment and DC pension contributions to reflect the fact that:
- the Coronavirus Job Retention Scheme ("CJRS") will end on 31 October 2020, and that the proportion of an employee's salary that the employer will be able to claim under the CJRS will reduce to a maximum of 70% (or £2,187.50) in September 2020, and 60% (or £1,875) in October 2020;
- from 1 July 2020, employees that have been furloughed will be able to work part-time for their employer. The money that employees will receive under the CJRS will be pro-rated in accordance with the part-time hours that each employee works, and pension contributions should be paid on the total amount of money received by the employee (for example, if an employee earned £1,000 a month from working and was due £500 furlough pay, then pension contributions should be made based on the total amount - £1,500); and
- from 1 August 2020, employers will no longer be able to claim the statutory minimum automatic enrolment pension contribution on an employee's furlough pay.
In addition to this, the guidance for trustees on scheme administration was updated to:
- reiterate the importance of all scheme members (especially those who are deemed to be vulnerable) having the ability to contact the scheme administrator;
- state that trustees should continue working with their administrator to agree a "plan for delivery", focusing on which tasks should be prioritised, and ensuring that any non-critical demands and/or queries that trustees would normally direct towards the administrator are limited; and
- re-emphasise the need for trustees and administrators to do their best in ensuring that members do not fall victim to pension scams.
Finally, the trustee guidance on reporting duties and enforcement activities was updated to reflect that the trustee reporting requirements which the Regulator paused at the start of COVID-19 will resume as usual on 1 July 2020. The only exception to this is that providers will continue to have 150 days (rather than the standard 90 days) in which to report late payments of contributions (other than deficit repair contributions) - although the Regulator will review this easement again at the end of September.
It is expected that further updates will follow as Government support is slowly withdrawn, and further easements from the Regulator come to an end.
Actions
Trustees (and sponsoring employers) should consider the updates to the guidance. In particular, they should be aware that the easements around reporting are ending.
Pensions Ombudsman Determination - Norton Motorcycles
SG was the sole trustee (the "Trustee") of three schemes, being the Commando 2012 Pension Scheme, Donington MC Pension Scheme and Dominator 2012 Pension Scheme (together the "Schemes"). The Trustee was also the sole director of the Schemes' principal employer.
Members were encouraged to transfer into the Schemes as an opportunity to invest in the Norton Motorcycles business with the incentive of a tax-free commission on completion of their transfer. The Trustee invested all of the members' assets in preference share capital in Norton Motorcycle Holdings Limited, of which the Trustee was the sole director and shareholder. This decision was taken without the Trustee having obtained investment advice.
Complaints were brought by several members and the current trustee of the Schemes.
After extensive investigation, the Pensions Ombudsman found that although the Schemes had not been set up for an improper purpose, the Trustee had acted in breach of duty. For example the Trustee:
- acted dishonestly;
- breached the duty to avoid conflicts of interest, not to profit and to act with prudence; and
- breached the statutory knowledge and understanding duty.
The Pensions Ombudsman also found that there had been maladministration on the part of the Schemes' administrator, which lacked the necessary knowledge or experience to administer the Schemes.
The Pensions Ombudsman directed:
- the Trustee to pay back the amount of money that was lost by investing in Norton Motorcycle Holdings Limited, less any money already recovered, plus interest; and
- the Trustee and administrator to pay distress and inconvenience compensation in respect of the maladministration.
Action
None required. This determination highlights the importance of good pension scheme governance and ensuring that trustees comply with their statutory and trust duties.
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