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

• British Steel Pension Scheme consultation issued
• DWP issues consultation on capping early exit charges
• Financial Services and Markets Act 2000 (Pensions Guidance) Regulations 2016 published
• DWP publishes guidance on state pension deferral
• EU-US “Privacy Shield” for data transfers: further negotiation required
• FCA publishes report on access to financial services
• HMRC launches review of Double Taxation Treaty Passport scheme
• ICSA publishes consultation on minuting meetings
• Member-borne commissions – deadline approaching
• Consultation on LGPS regulations published
• PASA urges trustees to take action on GMP reconciliation
• PPF publishes revised actuarial factors
• Mrs X v Kingfisher Pension Trustee Limited and Kingfisher plc (Pensions Ombudsman, 22 March 2016)

British Steel Pension Scheme consultation issued

On 26 May 2016, the DWP issued a consultation on various options for potentially helping the British Steel Pension Scheme (“BSPS”) as part of a wider package of Government support for UK steel, steel workers and affected localities (“the Consultation”). Whilst the Government makes clear that BSPS is in an exceptional situation and that it is essential to find a solution which will enable the continuation of the British Steel industry, the Consultation puts forward certain proposals which will be of interest to other DB schemes in a similar position.

• The BSPS trustees believe that the BSPS could continue were they able to reduce future indexation and revaluation on accrued rights. Recognising that such changes are not feasible under current legislation, the Consultation proposes changing relevant legislation either to allow the trustees to amend the scheme without member consent to reduce benefits or to permit a transfer without consent to a new scheme which would provide lower benefits.

The Government acknowledges that any change to legislation to permit a transfer without consent to a scheme providing lower levels of indexation and revaluation would be of general application to “very large” schemes in “similar circumstances” to the BSPS.

A supporting factsheet was issued on 27 May 2016.

For full details, please see our forthcoming Alert.

DWP issues consultation on capping early exit charges

On 26 May 2016, the DWP published a consultation on capping early exit charges for members of occupational pension schemes (“the Consultation”) that contain “flexible benefits”.

With the aim of ensuring that all consumers benefit from the cap, regardless of the type of pension scheme they have saved into, comparable proposals have been published by the FCA in respect of personal pension schemes.

Key points are as follows:

• With effect from 2017, the Government intends to introduce a cap on early exit charges imposed by trustees, managers and / or providers of occupational and personal pension schemes when a member leaves the scheme early in order to access their benefits flexibly.
• The cap is not intended to prevent early exit charges being levied in existing schemes; rather the legislation will aim to ensure that consumers wishing to access their pension savings flexibly have an appropriate degree of protection.
• Mirroring the FCA’s proposals in the contract based sphere, the Consultation suggests a cap of 1% for existing occupational pension schemes and 0% for new occupational pension schemes.
• If there is evidence that pension schemes are increasing costs elsewhere to compensate for the loss of exit charges, the Government will consider whether action is necessary to ensure members are protected.

For full details, please see our Alert.

On the same day, the DWP published analysis of the expected impact of a 1% cap on early exit charges in trust-based DC schemes. It supplements the Impact Assessment that was published alongside the consultation, setting out the expected effects of introducing caps on exit charges over a range of levels of cap, from 2-10%. The analysis suggests that a 1% cap would create costs to occupational pension schemes, providers and administrators as a result of lower revenue from charges foregone, estimated at £4.66m in the first year and £0.61m in each subsequent year.

Financial Services and Markets Act 2000 (Pensions Guidance) Regulations 2016 published

The Financial Services and Markets Act 2000 (Pensions Guidance) Regulations 2016 were laid before Parliament on 23 May 2016 and will come into force on 15 June 2016. They specify terms used in the amended definition of “pensions guidance” in section 333A of FSMA, which was amended by the Bank of England and Financial Services Act 2016.

DWP publishes guidance on state pension deferral

The DWP published updated information on 24 May 2016 in relation to state pension deferral for people who reached state pension age before 6 April 2016. The guidance includes information on what state pension deferral is and what happens if you die after deferring your state pension.

EU-US “Privacy Shield” for data transfers: further negotiation required

The EU Parliament issued a press release on 26 May 2016, noting that a non-legislative resolution had been passed in relation to the proposed EU-US “Privacy Shield”. The resolution welcomes the efforts of the Commission and the US administration to achieve “substantial improvements” in the Privacy Shield compared to the Safe Harbor regime which it is to replace, but voices concern about “deficiencies” in the proposed new arrangement that has been negotiated. Discussions on the subject are set to continue.

FCA publishes report on access to financial services

On 24 May 2016, the FCA published an ‘occasional paper’ on “Access to Financial Services in the UK”. The paper aims to “stimulate ideas and foster a culture of access and inclusion” throughout retail financial services, including firms, regulators, Government and consumer organisations, and includes consideration of the guidance and advice currently available in the pensions sphere. The paper was commissioned by the FCA to prompt debate, culminating in a range of questions for the FCA to consider, with its findings to be taken forward by the FCA, other regulators, the Government, firms and consumer groups.

HMRC launches review of Double Taxation Treaty Passport scheme

On 26 May 2016, HMRC launched a consultation on renewing and extending the scope of the Double Taxation Treaty Passport (DTTP) scheme.

The consultation allows HMRC to review the DTTP scheme with the aim of ensuring that it still meets the needs of UK borrowers and foreign investors. It seeks views on extending the scope of the DTTP scheme to investors entitled to sovereign immunity from UK tax (“sovereign investors”), pension funds and other entities.

The review closes on 12 August 2016.

ICSA publishes consultation on minuting meetings

ICSA: The Governance Institute, has published a consultation in relation to good practice in minuting meetings. It notes that, as it currently stands, there is relatively little formal guidance about how this “basic aspect of the administration of business” should most effectively be done.

Having received feedback from governance professionals, it is now seeking input from those whose day-to-day work it is, with the aim of ensuring that the guidance on good practice “reflects the reality of modern market practice on a cross-sectoral basis.”

The consultation closes on 24 June 2016.

Member-borne commissions – deadline approaching

The ban on member-borne commissions will apply in respect of any new commission arrangements, or variations or renewals of existing commission arrangements, entered into on or after 6 April 2016 in relation to a “specified scheme”.  A “specified scheme” is, broadly, a scheme with some or all DC benefits that is also a “qualifying scheme” for auto-enrolment purposes.

6 July 2016 is the deadline for trustees to write to any person “who provides an administration service directly to the trustees”, informing them that their scheme is a “specified scheme” (if this is the case). If the ban applies to the scheme at that time, the service provider will have one month from the date it receives the trustees’ notification to comply with the ban on member-borne commissions.  It then has a further month to confirm to the trustees that it is compliant with the ban.

The trustees must confirm, on their scheme return, whether or not the service providers have provided the necessary confirmation as to compliance with their regulatory duty.

Further detail can be found in our Alert.

Consultation on LGPS regulations published

On 27 May 2016, the DCLG launched a consultation proposing changes to regulations governing the LGPS. The proposed changes are designed to implement policies on the “Fair Deal for staff pensions”, and on freedom and choice in pensions, in order to provide clarifications that have been requested by practitioners and to improve the operation of the regulations.

The consultation seeks comments on proposals to ensure that local Government and participating employers in the LGPS provide the appropriate level of pension provision, as set out in the 2013 Fair Deal guidance. It closes on 20 August 2016.

PASA urges trustees to take action on GMP reconciliation

On 24 May 2016, PASA issued a press release calling on pension schemes to move forward with their GMP reconciliation plans.

Geraldine Brassett, Chair of the PASA GMP Working Party, said: “What is clear is that there is still a huge [amount] of work to be done and with time running short much more support and guidance from the industry is required.” PASA, which released its second tranche of guidance on GMP reconciliations in February 2016, set out its key messages, including:

• it is not too late to get started but it is vital that those who have not yet got to grips with what is required take action soon because of the strong likelihood of intense pressure on resources
• simply accepting HMRC data as correct is not necessarily an easy option as a rectification exercise is still likely to be required
• when working with tolerances these must be carefully considered and scheme specific. 

PPF publishes revised actuarial factors

On 31 May 2016, the PPF published revised actuarial factors which are due to take effect from 1 October 2016.

The factors, which include commutation, early retirement, and pension equivalent of lump sum factors, are available on the PPF’s Technical Guidance pages. A revised note describing the principles behind the calculation of PPF factors was also published.

Mrs X v Kingfisher Pension Trustee Limited and Kingfisher plc (Pensions Ombudsman, 22 March 2016)

The PO dismissed complaints by various members in relation to scheme amendments, finding that the trustee and company had been entitled to make the changes.

Please see our case report for further details.