Developments in Employee Benefits law and practice

25 March 2019

Response to Collective Defined Contribution (CDC) consultation

“The UK has a world-class occupational pension system. But there is always room for improvement. I believe CDCs can be part of that improvement. … I am confident that well designed and run CDC schemes can offer advantages for some employers and employees in the UK.”

So says Guy Opperman, Pensions Minister, in his Foreword to the Government response to an earlier consultation on Delivering CDC Schemes, which highlights the Government decision to introduce CDC provisions slowly starting with the proposed Royal Mail (RM) scheme  and then building on this.

A JLT Let’s Talk on the response is available.

PRAG GMP equalisation guidance

The Pensions Research Accountants Group (PRAG) has published guidance on how pension scheme accounts need to account for their equalisation liabilities in respect of Guaranteed Minimum Pensions (GMPs) following last years Lloyds Banking Group judgment on addressing GMP inequalities.

Depending on materiality and other considerations, pension schemes will now need to disclose an estimate of the likely accounting liability or a statement that the issue will need to be allowed for in future accounting periods. 

PPI Briefing on defaults

The Pensions Policy Institute has issued Briefing Note 111, which looks at defined contribution (DC) pension scheme default investment strategies. The Briefing Note outlines current considerations and policy debates relevant to DC scheme default strategies and covers how:

  • Default strategies are changing after Freedom and Choice
  • Investment in illiquids and alternative assets could benefit default strategies
  • Membership characteristics may affect the most appropriate default strategy
  • Retirement pathways could play an important complementary role to default strategies
  • Consideration of Environmental Social and Governance (ESG) factors could involve increased implementation and assessment costs, but may also result in more secure, long-term returns
  • Consolidation could reduce charges and increase the accessibility of illiquid assets for default strategies.

BEIS launches consultation on recommendations made by the Independent Review of the FRC

The Department for Business, Energy & Industrial Strategy (BEIS) has launched a consultation on 11 March 2019 which is seeking views on the recommendations made by the Independent Review of the Financial Reporting Council (FRC) to create a new regulator responsible for audit, corporate reporting and corporate governance. 

The consultation will close at 11:45 pm on 11 June 2019 and the outcome will affect oversight of actuarial profession.

NMW Regulations 2019 

Under these regulations, SI 2019/603, amendments are made to the national minimum wage (NMW) legislation in order to increase the single, main hourly rate of the national living wage which was introduced in April 2016 for working individuals aged 25 and over. The hourly rate of the NMW for workers, aged 21 years or over (but not yet aged 25), workers aged 18 years or over (but not yet aged 21), those under the age of 18 and apprentices who are under the age of 19 or in the first year of their apprenticeship, are also increased in the UK. The Regulations come into force on 1 April 2019. 

The National Minimum Wage Regulations 2015, SI 2015/621, are amended to:

  • increase the rate of the NMW for workers who are aged 25 or over (the national living wage rate) from £7.83 to £8.21 per hour
  • increase the rate of the NMW for workers who are aged 21 or over (but not yet aged 25) from £7.38 to £7.70 per hour
  • increase the rate of the NMW for workers who are aged 18 or over (but not yet aged 21) from £5.90 to £6.15 per hour
  • increase the rate of the NMW for workers who are aged under the age of 18 from £4.20 to £4.35 per hour
  • increase the rate for apprenticeship from £3.70 to £3.90 per hour
  • increase the accommodation offset amount which is applicable where any employer provides a worker with living accommodation from £7.00 to £7.55 for each day that accommodation is provided.

Brexit update 

The UK will remain in the EU until at least Friday 12 April. The EU has rejected the Prime Minister’s request for a three month Brexit delay, but has allowed a two-tier Article 50 extension:

  • until 22 May (the day before European elections), if the Prime Minister manages to get her deal approved in Parliament next week; and
  • until 12 April in the event the Prime Minister does not get her deal approved. 
  • Provided that the UK announces it will hold EU Parliamentary elections by 11 April and manages to indicate a way forward then the EU might consider a long extension. 

Contact:

John W. Wilson LLB(Hons) FPMI ACII, Head of Research| Email: john_wilson@jltgroup.com