Pensions Industry Update - April 2016
Contracting-out Countdown bulletin numbers 15 and 16
HMRC issued number 15 in its series of Countdown bulletins on 5 April 2016. This features the new GMP Checker service which became available to all pension scheme administrators from 6 April 2016 via GOV.UK. This service can be used to obtain GMP calculations, contributions and earnings information in respect of individual members (HMRC are currently working on a bulk facility for multiple member requests).
Countdown bulletin number 16 (issued on 13 April 2016) highlights the difficulty that some pension scheme administrators have experienced when trying to access the GMP Checker service. The bulletin also advises that it is the responsibility of pension schemes to monitor the movement of contracted-out rights after 5 April 2016 and that HMRC no longer need to be advised of any movements, i.e. transfers, that take place after that date. Movements that happened before 6 April 2016 still need to be reported to HMRC and well in advance of December 2018. This bulletin also looks at the GMP Scheme Reconciliation Service and addresses some FAQs in relation to that service.
Scorpion Campaign Revamp!
At the end of March, the Pensions Regulator (TPR) revamped its Scorpion anti-pension scamming campaign producing a new booklet and short film. For the first time in the campaign, information on how to avoid a scam is separate, focussed and specific for pension savers. There are also clear steps to guide savers how to protect themselves.
DC Code “how to” guides
TPR has produced six new “how to” guides for consultation which cover the key areas of the revised DC code. The key areas are as follows: The Trustee Board, Scheme Management Skills, Administration, Investment Governance, Value for Members, Communication and Reporting. The guides are designed to help trustees implement the revised code and to explain to them how they can demonstrate compliance with the law. The consultation ends on 11 May.
New State Pension introduced
The new state pension came into effect on 6 April 2016 replacing the old system. The full amount of the new state pension is £155.65 per week (16/17 rate), but not everyone will get this amount as it will be dependent on, amongst other things, an individual’s National Insurance record. The Government has made changes to much of the documentation it has produced in the last few months and the updated fact sheets, statements, handouts, glossary and question and answer documents can be found below:
- State pension fact sheets
- Your state pension statement explained
- Your new state pension explained
- New state pension handouts
- State pension top-up booklet
- State pension top-up - guidance for pension advisers
- New state pension glossary
- State pension changes - questions and answers for stakeholders
Police Pension 1987 Scheme commutation factors
Updated guidance and factors has been published in respect of the Police Pension 1987 Scheme.
National Insurance Credits for Armed Forces spouses and civil partners
The DWP have announced National Insurance Credits for spouses or civil partners who may have missed out on paying National Insurance contributions due to being overseas with their Service partners. These credits will be available back to 1975 and could help an estimated 20,000 people enhance their State Pension.
The credits have been introduced in recognition of the fact that accompanying a spouse or civil partner on a posting overseas affected their ability to work and therefore were unable to pay National Insurance Contributions. This potentially caused a gap in their National Insurance record and thereby affecting the amount of State Pension they receive in retirement.
Making Retirement Choices Clear
The Association of British Insurers (ABI) has issued a consultation on simplifying the language used in connection with retirement options Making Retirement Choices Clear.
The new guide aims to ensure that the language relating to the new retirement choices introduced under Government reforms in April 2015 is communicated to customers in a simple, clear and consistent manner, avoiding technical terms and therefore helping people to have more clarity on the options available to them at retirement.
Indexation of public service pensions
HM Treasury has issued new guidance for the Indexation of public service pensions which includes an updated direction on indexation of the Guaranteed Minimum Pension. This follows an announcement that the Government will continue to price protect the Guaranteed Minimum Pension of public sector workers.
Secondary Annuities Market
The Government is planning to launch the secondary annuity market in April 2017. The creation of this market is intended to extend greater flexibility and freedom to people who had little choice but to buy an annuity with their pension pot. These changes will provide scope for individuals to sell their annuity in return for a taxable lump sum (which could be paid to a more flexible pension product.)
HMRC have therefore issued a Consultation Document surrounding the proposed detail of the new tax framework for the secondary annuities market. The consultation closes on the 15 June 2016.
The Financial Conduct Authority has also published their own FCA Consultation surrounding its proposed rules and guidance on the secondary annuity market and this will play a key role in determining how consumers will be able to sell their annuity incomes on the secondary market.
This consultation closes on the 21 June 2016.
Changes from 6 April 2016
This is a reminder of some of the changes that came into effect from 6 April 2016:
- Single Tier State Pension for individuals reaching State Pension Age on/after 6 April 2016
- End of contracting-out – HMRC GMP Checker service now available
- Lifetime Allowance reduced to £1 million
- New transitional protections available – Fixed and Individual Protection 2016
- Tapered Annual Allowance for high earners
- All pension input periods (Annual Allowance) aligned with the tax year
- Flexibly accessed DC pensions (including UFPLS) reportable under RTI
- Various lump sum death benefits taxed at recipient’s marginal rate and reportable under RTI
- Defined benefit lump sum death benefits paid outside the two year window on the death of a member under age 75 no longer unauthorised, but taxable at recipient’s marginal rate and reportable under RTI. Common examples of a defined benefit lump sum death benefit are pension guarantees and lump sums calculated as a multiple of salary.