Significant changes to data protection law are due to come into force in just over a year's time on 25 May 2018 in the form of a new EU General Data Protection Regulation (GDPR). The GDPR will impact on the way that pension schemes can lawfully collect, use, retain and share information about members. With new duties to report breaches and the potential for significant financial penalties, it is important for trustees to ensure that they are ready to comply with the GDPR. There are a number of action points that will need to be considered and therefore trustees should start their preparations as soon as possible. In this Pensions Alert we provide an overview of some of the differences between the GDPR and current data protection legislation in the UK, and set out some action points for trustees to consider.
The existing EU Directive on data protection was adopted in 1995 and was implemented into UK law by the Data Protection Act 1998 (DPA). In contrast, the GDPR will be directly applicable in Member States without the need for implementing national legislation and it is intended that this will lead to greater harmonisation. However, there is still some scope for Member States to make provision in certain areas.
The Information Commissioner's Office (ICO) has already published some guidance, including an overview of the GDPR. The ICO describes the overview as a "living document" and notes that it is working to expand it in key areas. Additional European level guidance and additional guidance from the ICO on specific subject areas is also expected.
Given the ability for Member States to make provision in certain areas and the evolving nature of the guidance, the actions that trustees need to take may also develop over time, but it is still important for trustees to start work on this issue now. It is also important to note that the ICO's overview guidance reports that the government has confirmed that the UK's decision to leave the EU will not affect the commencement of the GDPR.
Overview of key changes
Many of the main concepts and principles of the GDPR are similar to those in the DPA but there are also new elements and significant enhancements. The ICO notes that this means that there are some new things to do and some things will need to be done differently. In this section we highlight some of the changes, focusing on those which we think will be particularly relevant for trustees of occupational pension schemes.
- The definition of personal data in the GDPR is wider than the definition in the DPA, with personal data including a wide range of identifiers such as an identification number, an online identifier and location data
- Like the DPA, the GDPR makes special provision for certain categories of data such as data concerning health. In the DPA this data is called "sensitive personal data" and in the GDPR it is referred to as "special categories of personal data"
- Under the GDPR there has to be a legal basis for the processing to be lawful and the GDPR sets out the legal bases available for personal data and for special categories of personal data. There are similarities with the DPA here but changes introduced by the GDPR will make it harder to meet the requirements for lawful processing. Differences of particular note include that: (i) the GDPR sets a higher standard for consent including that an indication of consent must be unambiguous and a positive indication of agreement, and individuals will also have the right to withdraw consent; and (ii) if using the "legitimate interests" basis, data subjects must be informed of the legitimate interests that are being pursued, and they will also have the right to object to processing on these grounds
- Under the GDPR the information that has to be provided to data subjects about the processing of their data is more extensive. There are some differences to the information that has to be provided depending on whether the personal data was obtained directly from the data subject. As part of the provisions on transparency, the GDPR also states that the information must be provided in a concise, transparent, intelligible and easily accessible form, using clear and plain language
- The GDPR also strengthens the right for data subjects to obtain access to their personal data. Information must generally be provided free of charge (currently a fee may be charged) and the timescale in which information must be provided is shorter
- The GDPR includes specific legal obligations for data processors (which in a pension scheme context will, for example, include administrators) including to maintain a record of processing activities carried out on behalf of a controller. However, the involvement of a data processor does not relieve the data controllers (the trustees) of their obligations. The GDPR also makes more extensive provision about the content of contracts between controllers and processors
- The GDPR includes a new principle of accountability which requires the data controller to be able to demonstrate compliance with the principles relating to the processing of personal data. Data controllers will also have to maintain records of processing activities. They must also comply with the principles of: (i) data protection by design which requires data protection risks to be taken into account throughout the process of designing a new process or service; and (ii) data protection by default which means that only personal data which are necessary for each specific purpose are processed, with this obligation applying to the amount of personal data collected, the extent of the processing, the period of retention, and access
- The GDPR introduces duties to notify the relevant supervisory authority (in the UK, this is the ICO) of a "personal data breach" if the breach is likely to result in a risk to the rights and freedoms of individuals. "Personal data breaches" include those leading to the loss, alteration, unauthorised disclosure of, or access to, personal data. The notification must be made within 72 hours of becoming aware of the breach. Individuals must be notified directly without undue delay if a breach is likely to result in a high risk to their rights and freedoms
- Currently the ICO can impose financial penalties of up to £500,000. The maximum fines under the GDPR are much higher. The maximum fine for certain breaches including non-compliance with the basic principles for processing including conditions for consent is whichever is higher of 20 million Euros or 4% of global turnover. For some breaches the maximum fine is whichever is higher of 10 million Euros or 2% of global turnover. These significantly increased maximum fines demonstrate the importance of ensuring compliance with the GDPR
- The GDPR also makes it easier for individuals to bring private claims against data controllers and processors, for example, any person who has suffered material or non-material damage as a result of a breach of the GDPR has the right to claim compensation
Action points for trustees
Trustees will need to ensure that they are ready to comply with these significant changes to data protection law. As well as starting to plan for the changes, it would be useful for trustees to take this opportunity to check that they are compliant with those parts of the GDPR which reflect the existing law. Trustees may also find it useful to engage with the scheme employer as the employer is likely to be looking at this issue for its organisation more generally and there may be opportunities to share knowledge about the GDPR.
Action points for trustees to consider include the following.
- Include this issue in trustee work plans for the next 12 months and compile an action plan
- Review the data that the scheme holds, where it came from, how it is managed and who it is shared with. Consider which scheme data meets the definitions of "personal data" and "special categories of personal data", ensure that there is a lawful basis for processing in each case and consider the appropriate period of retention
- If the lawful basis is "legitimate interests", ensure that you are clear as to what those interests are and that processing on that basis is not overridden by the interests or fundamental rights and freedoms of the data subject
- If the lawful basis is consent, ensure that the processes for seeking, obtaining and recording consent meet the higher standards in the GDPR
- Review and update privacy notices provided to members so that they contain the correct information, are provided at the right time and are appropriately written
- Review contracts with data processors and ensure that any terms of the contract that do not meet the requirements of the GDPR are re-negotiated. Engage with data processors about their compliance with the GDPR
- Ensure that relevant policies and documents are in place to demonstrate compliance in accordance with the principle of accountability
- Put in place a process for identifying and assessing breaches and, where appropriate, notifying those breaches
- Review the terms of trustee liability insurance in light of the new penalties under the GDPR
We will be issuing more Pensions Alerts about the GDPR focusing on some of the specific issues for trustees to consider, as well as providing updates in relation to further guidance and developments as they are issued.
If you would like further information, advice or training about the implications of the GDPR for trustees of occupational pension schemes, please get in touch with your usual DLA Piper pensions contact.