Nine Key Pension Issues You'll Have To Deal With In 2020

At the beginning of 2019, we flagged uncertainty around how or even whether Brexit would be delivered. At the start of 2020, we finally seem to have some more clarity on this issue. Will 2020 finally be the year that the UK leaves the European Union? And will this free up parliamentary time to focus on crucial domestic issues such as pensions, savings and an ageing population?

This Insight provides an overview of nine key developments that will hit the headlines in the pensions industry in 2020, examines some of the bigger picture trends that will attract attention and looks at what happened to the key issues we highlighted at the beginning of 2019.

Key developments in pensions in 2020

1. Brexit finally meaning Brexit

   At 11pm on 31 January 2019, the UK will very probably leave the European Union. Unlike at the beginning of 2019, the government now has the parliamentary majority to deliver on this Brexit promise.

   What will this mean for pensions in the UK? At the beginning, not very much - the UK will enter into a transition period that will see EU laws and rules continue to apply. The transition period is currently scheduled to last until 31 December 2020. It is this date (or the end date of any extension to the transition period) that will be of greater consequence for trustees and employers than the end of January, as this potentially marks the point in time from which we begin to diverge from EU legislation and the European regulatory framework for pensions and financial services.

   In preparing for this, trustees need to consider the issues that could become relevant to their schemes (e.g. are there investments in EU-domiciled pooled funds? Does the scheme pay benefits to non-UK bank accounts for overseas members? Are there any cross-border issues?) and be ready to act quickly if required.

2. The return of the Pension Schemes Bill

   All the way back in October 2018, Guy Opperman MP, the government minister responsible for pensions, stated his intention to deliver a "very substantial" bill addressing multiple areas of pensions regulation in the summer of 2019. Summer gave way to autumn, but the Pensions Schemes Bill 2019-20 was finally laid before the House of Lords on 15 October 2019. Then, like most unfinished parliamentary business, the Pensions Schemes Bill 2019-20 was lost when parliament dissolved ahead of December 2019's general election.

   Gone, but not forgotten. In its place, a new Pensions Schemes Bill 2020 was promised in the Queen's Speech and has now been introduced into the House of Lords. As expected, it covers the same areas as the original bill:

   collective defined contribution; changes to the defined benefit funding regime and greater powers for The Pensions Regulator ("TPR"); and pensions dashboards. In addition, it includes similar miscellaneous provisions on administration charges, transfers and the Pension Protection Fund ("PPF").

   Anyone who spent time reviewing its predecessor will be relieved to know that the Pensions Schemes Bill 2020 is not materially different from its predecessor. There are, however, some changes between the 2019 and 2020 bills. We are reviewing these and will be sending out an Insight on the new bill soon.

3. Consultation on aligning RPI with CPIH

   In January 2020, HM Treasury is expected to issue a consultation on aligning the Retail Prices Index ("RPI") measure of inflation with CPIH (a variant of the Consumer Prices Index that includes an estimate of owner occupiers' housing costs). For some time, the United Kingdom Statistical Authority ("UKSA") has expressed concerns with the current composition and use of RPI.

   Under existing legislation, the UKSA is required to obtain the Chancellor's consent to any change to the RPI that is 'fundamental and materially detrimental' to the holders of certain index-linked gilts (the last of which are due to expire in 2030).

   HM Treasury's consultation will ask:

   whether the proposed change in RPI should be made before 2030; and if so, when, between 2025 and 2030, a change should be made? It is expected that HM Treasury's consultation will be followed by a response published by the UKSA before the Chancellor's March 2020 Spring Statement (and the end of the financial year).

4. TPR...