7 days

7 Days is a weekly round up of developments in pensions, normally published on Monday afternoons. We collate this information from key industry sources, such as the DWP, HMRC and TPR.

In this 7 Days

• FCA consults on transaction cost disclosure in workplace pensions
• EIOPA publishes Annual Work Programme 2017
• European Commission – public hearing to discuss pan-European personal pensions
• House of Commons Library briefing papers published
• HMRC Pensions Tax Manual updated for Finance Act 2016 changes
• New public body offering debt advice, money and pensions guidance to be set up
• NEST publishes response to call for evidence on its future
• TPR acts in insolvency case to ensure members receive PPF benefits

FCA consults on transaction cost disclosure in workplace pensions

On 5 October 2016, the FCA published a consultation paper which proposes rules and guidance to improve the disclosure of transaction costs in workplace pensions.

Trustees and IGCs are required to report on and assess transaction costs in an annual statement. However, there is currently no corresponding obligation on parties involved in pension investments to disclose this information.

The FCA proposes a standard approach to the disclosure of transaction costs, together with a requirement for those managing investments to report administration charges and transaction costs to an IGC or the trustees of an occupational pension scheme when asked to do so. The consultation does not propose rules on how transaction costs should be presented, nor on the timing or frequency of their disclosure.

The consultation closes on 4 January 2017, with the FCA intending to publish its rules in a Policy Statement in the second quarter of 2017.

For further details, please see our Alert.

EIOPA publishes Annual Work Programme 2017

EIOPA published its Single Programming Document on 4 October 2016, outlining the strategic direction for its activities for 2017-2019. EIOPA notes that it has three main priorities: enhancing supervisory convergence, reinforcing preventive consumer protection, and preserving financial stability.

In the document, EIOPA states that “the trust of consumers in the area of financial sector, including insurance and pensions, deserves being enhanced, and EIOPA is targeting a range of measures to be a key contributor to its enhancement, with the customer interest at its centre […] Insurance companies and pension funds will continue to face a challenging economic and financial environment, with persistent low interest rates contributing to a search for yield behaviour. Simultaneously, insurers and pension funds will be called to provide further funding to the economy and will play an important role in the emergence of a Capital Markets Union. These developments call for an active and engaged supervisory community.”

European Commission – public hearing to discuss pan-European personal pensions

The European Commission will hold a Public Hearing in Brussels on 24 October 2016, on the creation of an EU-wide personal pensions product. This follows on from the launch of its public consultation on the subject in July 2016, and which closes at the end of October 2016.

The objective of the Public Hearing is to give an opportunity to stakeholders and citizens to discuss the issues that prevent the uptake of personal pensions and to provide practical suggestions to overcome existing barriers.

House of Commons Library briefing papers published

On 4 October 2016, the House of Commons Library published a briefing paper considering the introduction of the Lifetime ISA (“LISA”) from April 2017, and its role in encouraging people to save for retirement.

It also updated its briefing paper providing an overview of the PPF, on 3 October 2016.

HMRC Pensions Tax Manual updated for Finance Act 2016 changes

HMRC published updates to its PTM on 5 October 2016, to reflect some of the changes introduced by the Finance Act 2016. The updates include the following areas:

• further changes in relation to the LTA, and to reflect the introduction of IP16 and FP16
• changes to the tax position in relation to serious ill-health lump sums
• various changes in relation to dependants’ benefits
• changes in relation to trivial commutation small pots lump sums.

New public body offering debt advice, money and pensions guidance to be set up

On 9 October 2016, HMT and the DWP announced that they have agreed to take forward plans to develop a single public financial guidance body responsible for delivering debt advice, money and pensions guidance to the public.

The proposal to blend advice bodies had originally been raised in the Budget in March 2016, with the Government initially consulting on setting up a two body delivery model for government sponsored guidance. This included replacing MAS with a new, streamlined, money guidance body, and bringing together TPAS and Pension Wise into a new pension guidance body.

The Government notes in its announcement that “industry and consumer finance groups raised concerns about how two bodies might work together effectively and whether a single body would provide a better service for consumers”.

Following discussion of the feedback, it was decided that a single body would be more appropriate.

The announcement notes that next steps involve consulting on the best way to design a single body model. Legislation to create the guidance body is not therefore expected to be included in the Pensions Schemes Bill.

NEST publishes response to call for evidence on its future

On 4 October 2016, NEST published its response to the Government’s call for evidence on the future of NEST.

Expressing concerns that members with smaller pots lack the funds and the confidence to shop around at retirement, the response concludes that NEST needs to adapt, to avoid a “two-tier system” in which NEST members may miss out on the pension freedoms. Otto Thoresen, Chair of NEST, commented: “We believe NEST needs to be able to consider new options which will ‘do the hard work’ for our members whilst providing flexibility and security.”

TPR acts in insolvency case to ensure members receive PPF benefits

On 4 October 2016, TPR announced that it had used its powers to ensure members of a closed DB scheme receive PPF compensation after the scheme’s rules were changed.

A change had been mistakenly made to the DCT Civil Engineering Staff Pension Fund, resulting in accrued benefits being calculated on a DC, rather than DB, basis. This meant some members would not be eligible for PPF compensation.

Following an investigation, TPR declared the rule change void, and issued a Regulatory Intervention report on the case. Its Determinations Panel’s order had the effect of confirming the scheme as DB, and enabled the PPF to take on the scheme and its 11 members.

Nicola Parish, Executive Director for Frontline Regulation at TPR, said: “This case shows that we will use our powers to protect schemes in appropriate cases, regardless of the number of members. The modification of the scheme rules had a serious impact on reducing members’ accrued benefits, and so we considered it appropriate to act to protect them.”