The Pensions Brief - October 2018

ISSUES AFFECTING ALL SCHEMES

IORP II Directive – implementation

Two sets of regulations will come into force on 13 January 2019 that implement the requirements of the EU IORP II Directive into UK law.

One set of regulations replaces the requirement for schemes to operate internal controls with a requirement for schemes to operate "an effective system of governance including internal controls" that is proportionate to the size, nature and scale of the scheme's activities. Authorised master trusts will be exempt from the requirement. The regulations also set out a list of matters to be included in a code of practice that the Pensions Regulator must produce in relation to the effective governance system duty. Based on this list, it appears that schemes will need to produce written policies on various matters including key scheme functions, outsourcing of activities, and remuneration.

The other set of regulations makes changes relating to cross-border schemes and cross-border transfers.

Action

The requirement to establish an effective system of governance will come into force on 13 January 2019. However, the detail of what is required in this respect will be set out in a Regulator code of practice and this is unlikely to be finalised until the second half of 2019. Trustees should consider whether their current internal controls and governance framework is operating effectively, and should monitor progress on the Regulator code of practice. Once this is finalised, they should review their governance arrangements in light of it.

Brexit – impact on pensions legislation

Regulations have been laid before Parliament for approval which make changes to the legislation governing pension schemes to reflect Brexit. The main changes made are to:

adjust references to the UK as an EU/EEA state where a distinction is being drawn between EU/EEA states and other overseas countries; amend the Investment Regulations 2005 so that the assets of a trust-based scheme must consist predominantly of investments admitted to trading on UK regulated markets; and repeal the cross-border pension regime. The regulations will come into force on the date of Brexit.

Action

Once the regulations have been approved by Parliament, trustees should ask their investment consultant whether changes to the Scheme's investment portfolio will be required as a result of the amendment to the Investment Regulations 2005.

Budget 2018 – pensions aspects

The main pensions-related announcements in...