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Pensions Industry Update - September 2016

Thu 06 Oct 2016

Pensions Industry Update - September 2016

Autumn Statement date

The Chancellor’s (Philip Hammond) first budget statement will be on Wednesday 23 November 2016.  

Finance Act 2016

The Finance Bill 2016 received Royal Assent on 15 September 2016. This Act covered a number of eagerly awaited items like:

  • Lifetime Allowance reduction from £1.25m to £1m from 06 April 2016
  • Two new Transitional Protections – Fixed and Individual Protection 2016 from 06 April 2016
  • New dependants scheme pension test in respect of a member who had reached age 75 at death 
  • Inheritance tax charge will not arise when a scheme member designates funds for drawdown but does not draw all the fund before death
  • Aligning the pension tax rules on bridging pension with DWP legislation due to the introduction of the single tier state pension from 06 April 2016
  • Serious ill health lump sum permitted to be paid out of unused drawdown funds
  • Serious ill health lump sums taxable at individuals marginal rate when paid in respect of individuals aged 75 or over
  • DC scheme pensions in pension in payment to be paid as a trivial commutation lump sum where total pension savings are under £30,000 – This is only for scheme pensions not annuities
  • Where annuity is payable on death to a nominee and some or all the costs of the annuity could have been paid to a personal representative instead, those funds shall not form part of the estate for the purposes of inheritance tax

Newsletter 81

Pension Scheme Newsletter 81 includes a number of interesting topics like:

  • Serious ill health lump sum tax treatment
  • Event report
  • Relief at source annual returns of individual information for 2015 to 2016
  • Secondary annuities
  • Lifetime allowance
  • Annual Allowance calculator
  • Pension flexibility and pension scams

 The above link will take you directly to the full content on the gov.uk website.

 Pensions Advice Allowance

HM Treasury have issued a consultation (Introducing a Pensions Advice Allowance) on the government’s plans to allow people to use £500 tax free from their DC pension pot to pay for regulated retirement advice.

The consultation sets out the Government’s preferred design for this allowance, which would be introduced from April 2017.

The proposed new allowance goes further than the current provision which only allows people to get advice on the pension pot from which the advice fee is taken. The allowance is designed to help people with the upfront cost of advice and allow an opportunity to consider their retirement plans, as a whole, carefully in advance of taking their pension.

The consultation closes on 25 October 2016.

 

Pension Wise standards: changes for secondary annuity market guidance – FCA Consultation Paper

The FCA is responsible for setting, maintaining and monitoring the standards applicable to Pension Wise’s designated guidance providers.

The purpose of the changes outlined in this consultation paper is to secure an appropriate degree of consumer protection for individuals and contingent beneficiaries who seek guidance from Pension Wise about whether to sell, or the impact of selling, the income from an annuity under the proposed secondary annuity market.  These changes are:

  • To make clear the standards that apply when designated guidance providers give advice to individuals and contingent beneficiaries about selling an annuity on the secondary market
  • Set out the knowledge requirements that the FCA expect individuals delivering guidance to have before giving guidance about selling an annuity
  • Set out the minimum content that they expect a designated guidance provider to go through in a guidance session about selling an annuity
  • Provide examples of the sort of information that they expect a designated guidance provider to collect from individuals during the session to inform the guidance they give to the individual or their contingent beneficiaries.

In addition, the consultation paper also puts forward a number of minor changes to reflect how consumers are actually using Pension Wise and how the service has evolved since it was established. 

The consultation closed on 4 October 2016.

Pension Ombudsman Service has changed name to The Pension Ombudsman

Because of a perceived lack of clarity/confusion surrounding the service, the Pension Ombudsman Service name has been changed to The Pension Ombudsman (TPO).  The Pension Ombudsman himself said “This name change will help to simplify what is a muddled and unnecessarily complicated customer journey when it comes to pensions related disputes. By adopting a similar branding style to that of our partner organisations, the public will be clear on who to approach if they have a pension problem.”

Lifetime ISA (LISA)

HM Treasury has updated its design note and fact sheet on the Lifetime ISA, both of which were originally published on the day of the last Budget.

This follows the presentation to parliament of the Savings (Government Contributions) Bill 2016-17.  The Bill makes provision for Government bonuses and other account features for both the Lifetime ISA and Help-to Save accounts.

Amongst other things the Bill sets out which withdrawals from the Lifetime ISA do not trigger a charge and provides arrangements for the payment of the charge payable on other withdrawals. 

Further details on the requirements for Lifetime ISA providers, the Government bonus, account withdrawals and the operation of accounts will be set out in regulations to be made by HM Treasury.

More details are expected in the Autumn Statement on the 23 November 2016.

 PPF Compensation Cap

The DWP have published a consultation on draft legislation relating to the introduction of a new PPF compensation cap for those with long service, from 6 April 2017.

Currently, anyone under a scheme’s normal pension age when the employer becomes insolvent is paid compensation based on 90% of their expected pension, subject to a maximum cap (the “compensation cap”).

The new proposals include measures to increase the cap by three per cent for each full year of pensionable service over 20 years up to a maximum of twice the standard cap.  Current compensation payments will be recalculated to take account of the new long service cap but there will be no backdating

The consultation closes on 9 November 2016.

 VAT Deadline extended

HM Revenue and Customs (HMRC) have again extended the deadline to implement revised methods for the deduction of VAT on pension costs.

The transition period has been extended by a further 12 months, meaning that organisations and trustees now have until 31 December 2017 to amend arrangements whereby employers can recover VAT that is incurred by running a workplace pension scheme, following a Court of Justice of the European Union (CJEU) ruling made in 2013.

During the extended transition period, those who have already made changes in light of the decision and previous HMRC guidance may continue with these arrangements, provided that both the employer and pension scheme trustees agree and that they both apply the same treatment. Alternatively, they can revert back to prior treatment of VAT on pension fund management costs.

Pensions Dashboard

HM Treasury have now confirmed that a prototype of the Pensions Dashboard will be ready by March 2017 and have secured an agreement from eleven pension providers to build the working prototype. 

The Pensions Dashboard is a platform being designed to let savers see all their pension pots in one place, online, to enable them to keep track of their pension pots so they can plan more effectively for retirement.

The Association of British Insurers has agreed to manage the pilot project

The Government hopes to have the final product in place for consumers by 2019.