Pensions Industry Update - May 2016

Thu 02 Jun 2016

This month's pensions industry update includes a summary of HMRC Newsletter 78 and much more

HMRC Pension Schemes Newsletter 78

The latest newsletter in the series covers the secondary annuity consultation, the double taxation certificate of residents online service, the tapered annual allowance (in particular, when a Pension Saving Statement (PSS) must be provided), transitional protection interim process/guidance, the payment date of an Uncrystallised Funds Pension Lump Sum (UFPLS), serious ill health lump sums and reporting non-taxable death benefits via RTI.

Countdown Bulletin 17 

The 17th edition provides further information on the GMP Checker specifically in relation to S148 factors, GMP increments and when a CA1597 still needs to be sent (if applicable), Scheme Reconciliation Service (SRS) further information, DWP update which includes information in relation to the new State Pension. Other items include Scheme Cessation and where to direct customers depending on their need.

New Pension Tracing Service 

There is a new Pension Tracing Service. This online service should be used to find contact details for workplace or personal pension schemes, it will not confirm if there is a pension or the amount. To use the service you will need the name of an employer or pension provider. The website also provides a telephone number and address if this is preferred.

TPR Code of Practice no: 13 finalised

The Pensions Regulator has published the revised version of Code of Practice no: 13 for occupational trust-based schemes providing money purchase benefits.  As part of the official approval process, the code has now been laid before Parliament and is expected to come into force in early July.

The revised code is divided into six key sections, namely the trustee board, scheme management skills, administration, investment governance, value for members and communicating and reporting.  In addition, the code will be supported by a series of “how to” guides which have themselves been the subject of a recent consultation. 

The Queen’s Speech 2016

This year’s State opening of Parliament took place on 18 May 2016.  Of particular interest in the Queen’s Speech was the inclusion in the legislative programme of both a Pensions Bill and a Lifetime Savings Bill.  The proposed main features of these are as follows:

Pensions Bill

Master Trusts (Great Britain only)

  • Master Trusts would have to demonstrate that schemes meet strict new criteria before entering the market and taking money from employers or members.
  • The Pensions Regulator would be given greater powers to authorise and supervise these schemes and take action when necessary.

Cap on early exit charges (Great Britain only)

  • Early exit fees charged by trust-based occupational pension schemes would be capped.
  • A system would be created that enabled consumers to access pension freedoms without unreasonable barriers.  We believe that this is a reference to early exit charges and changes to the transfer process outlined in the recent HM Treasury consultation response.

Restructuring financial guidance (UK-wide)

  • A new pension guidance body would be created, bringing together the Pensions Advisory Service, Pension Wise and the pension services offered by the Money Advice Service.
  • A new money guidance body would replace the Money Advice Service and be charged with identifying gaps in the financial guidance market to make sure consumers can access high quality debt and money guidance.

Lifetime Savings Bill (UK-wide)

  • Those in work but getting working tax credits or Universal Credit who save up to £50 a month would receive a government bonus of 50% - to a maximum of £600 – after two years. Savers who continue to use the scheme for a further two years could earn up to another £600.
  • For adults under 40, the government would top-up subscriptions to a Lifetime ISA with a bonus of 25% on all savings (up to £4,000 a year).
  • Lifetime ISA account holders would be able to access some or all their funds to buy their first home (worth up to £450,000), or from age 60 without charge.  There are also proposals to allow access to Lifetime ISA funds at other times, subject to a loss of bonus and possible exit charges.

Lifetime survivors’ pensions from public service schemes

The House of Commons Library research service provides MPs and their staff with the impartial briefing and evidence that they need to carry out their role in scrutinising Government, proposing legislation and helping their constituents.

This briefing paper issued on 19 May 2016 looks at the development of lifetime survivors’ pensions (as opposed to pensions that cease on remarriage or cohabiting) in the public sector.

Pension Protection Fund (PPF)

The PPF has recently received a significant amount of press coverage particularly in relation to the sale of Tata Steel UK and the collapse of BHS.  Both have pension schemes with large deficits that could end up in the PPF.

In light of this the PPF has published a short document entitled Common Misconceptions, describing what the PPF is, how it is funded, and the benefits that it provides to its members.

State Pension Reforms

The National Audit Office has produced a report identifying The impact of state pension reforms on people with GMP.

The report finds that the impact of the new state pension for those people who have GMP will vary widely.  It reports that the group with the largest negative effect by the introduction of the new state pension will be those with a long period of contracted-out service but are close to retirement.  Therefore they have little time to build up any additional entitlement in the new state pension.

Section one of the report contains an informative summary on how GMP worked before the abolishment of contracting-out, the rationale behind GMP and how the GMP entitlement was built up.

Brexit - Effects on UK Pension Schemes

The Society of Pension Professionals has published a report Would Brexit benefit or be detrimental to UK pensions?

The report provides an overview of the various forms that Brexit might take and outlines the wider implications on pension schemes depending on the result of the vote.

It reports that a UK exit from the EU could provide a “slight boost” to pension funds in the short term but any impact in the longer term is much harder to gauge and dependent on the terms negotiated by the UK Government.

It also provides some of the anticipated pros and cons of Brexit. For example, there may no longer be the requirement to equalise GMPs as this is based on European Law, if Britain were to vote leave.

Should Britain vote to leave, it will have two years from the date on which it formally notifies the EU council of the decision to leave, to negotiate its terms of withdrawal.  However the process could take significantly longer than this so a vote to leave would change nothing material in the short term.