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

• Summer Budget 2015
• The Pensions Act 2014 (Commencement No. 5) Order 2015
• The Public Service Pensions Act 2013 (Judicial Offices) (Amendment) Order 2015
• DWP: further update on Greece
• EIOPA consults on a Pan-European Personal Pension product
• EIOPA publishes report on individual transfers of pension rights
• GAD Technical Bulletin published
• House of Commons Library publishes briefing paper on the guidance guarantee
• House of Commons Library publishes briefing paper on pension rights in civil partnerships and same-sex marriages
• TPR publishes employer guide to DB funding code of practice
• Nortel decision confirmed

Summer Budget 2015

In the summer Budget on 8 July 2015, the Chancellor of the Exchequer, as expected, turned his attention to pensions once more.

The key points were as follows:

• With effect from 6 April 2016, the Government will restrict pensions tax relief for individuals with incomes, including pension contributions, above £150,000 by tapering away their AA to a minimum of £10,000.
• The Government has published a consultation to seek views on whether there is a case for reforming pensions tax relief to strengthen incentives to save.
• It was confirmed that, with effect from 6 April 2016, the LTA will reduce from £1.25 million to £1 million. Transitional protection will be introduced, alongside this reduction, for those with pension rights already over £1 million.
• With effect from 6 April 2018, the LTA will be indexed annually in line with CPI.
• As announced in the Autumn Statement (see our Alert), the tax rate that applies on lump sums paid from the pension of individuals who die aged 75 and over will be reduced from 45% to the recipient’s marginal rate from the tax year 2016/17.
• Plans for the secondary market for annuities will be announced in autumn 2015 with implementation delayed until 2017 “in order to ensure there is a robust package to support consumers in making their decision”.
• Access to Pension Wise will be extended to those aged 50 and above and a nationwide marketing campaign will be launched to further raise awareness of the service.
• A consultation will be carried out, as we mentioned in 7 Days of 22 June 2015, on options aimed at making process for transferring pensions from one scheme to another quicker and smoother, including in relation to any excessive early exit penalties.

Despite much speculation ahead of the Budget, no immediate changes were made in respect of salary sacrifice arrangements. It was noted that these are becoming increasingly popular and the cost to the taxpayer is rising; while the Government has opted to leave them alone for now, it intends to “actively monitor” the growth of these schemes and their effect on tax receipts.

See our Alert for full detail.

The Pensions Act 2014 (Commencement No. 5) Order 2015

The Pensions Act 2014 (Commencement No. 5) Order 2015 was made on 6 July. The fifth Commencement Order made under the Pensions Act 2014, it brings into force certain provisions of the Act, in particular, allowing regulations to be made in connection with the abolition of DB contracting-out and with changes relating to state pension credit.

The Public Service Pensions Act 2013 (Judicial Offices) (Amendment) Order 2015

The Public Service Pensions Act 2013 (Judicial Offices) (Amendment) Order 2015 was laid before parliament on 10 July 2015 and amends the Public Service Pensions Act 2013 (Judicial Offices) Order 2015 (“the 2015 Order”). The 2015 Order specified the judicial offices which comprise “the judiciary” for the purposes of the Public Service Pensions Act 2013, and therefore eligible to be included in a judicial pension scheme made under that Act. This new Order adds further offices to the list of specified judicial offices in the 2015 Order.

DWP: further update on Greece

Last week we reported that Chancellor George Osborne had confirmed that UK Government payments, including state pension and public service pension payments, were continuing to be made into Greek bank accounts. He noted that the DWP was in the process of contacting Greek residents drawing a British state or public sector pension from a Greek bank account and has given advice on how to switch payments to non-Greek bank accounts if they wish.

The advice from the DWP on 9 July 2015 remains the same: Greek banks will be closed until at least midnight on 13 July, with restrictions on its banking system. However, international payments into Greece are exempt from these restrictions, and UK government payments will continue to be made into Greek accounts in the usual way.

The DWP note that “the situation remains fast moving and uncertain, and the government recognises customers may be concerned”, and that the DWP are continuing to contact those people who draw a British state pension in Greece, and helping them to switch these payments to a non-Greek bank account if they wish. In relation to members of public service pension schemes who draw pensions from a Greek bank account, the DWP state that members’ pension scheme providers should be attempting contact, to talk through options. Members remain free to contact their scheme provider themselves should they wish to discuss their options.

EIOPA consults on a Pan-European Personal Pension product

EIOPA published a Consultation Paper on 7 July 2015 relating to the creation of a standardised pan-European Personal Pension Product (PEPP).  It invites feedback on proposals for the creation of a PEPP, envisaged to be a long-term retirement savings product.

The objective of the proposal is to encourage EU citizens to save for an adequate retirement income by creating a “simple, transparent, cost-effective and trustworthy” product. To achieve this, EIOPA calls for the creation of a harmonised legal framework for an internal European PEPP ​market that will “ensure a level playing field between all providers; remove existing barriers to cross-border business and, thus, facilitate cross-border offering of PEPPs to consumers; as well as facilitate a multi-pillar approach to pension saving”.

The consultation period will end on 5 October 2015.

EIOPA publishes report on individual transfers of pension rights

EIOPA published its ‘Good Practices Report’ on 8 July 2015, on transferability of individual supplementary pension rights. In it, EIOPA identified the major impediments to individual cross-border and national transfers as well as good practices to overcome these. Their aim is to create “more transparency in the interest of consumers and facilitate the internal market for supplementary pension rights”.

EIOPA outlines key areas which should significantly facilitate the transferability of individual supplementary pension rights, including:

• domestic and cross-border transfers being treated equally in terms of regulations and restrictions
• scheme members receiving adequate information in order to take informed decisions on whether a transfer is beneficial for them
• charges reflecting the actual work necessary to carry out the transfer, and
• the transfer process being more efficient to enable schemes to complete transfers within reasonable time limits.

GAD Technical Bulletin published

GAD published a technical bulletin on 9 July 2015, providing an overview of the information contained in the Budget. The bulletin focuses on two significant announcements – the Annual Allowance taper and the consultation on potential reform to pensions tax relief – but also covers in brief other measures announced.

House of Commons Library publishes briefing paper on the guidance guarantee

The House of Commons Library published a briefing paper on 7 July 2015, looking at the ‘guidance guarantee’ that sits alongside the new benefit flexibilities. The paper looks at the development of the policy, its delivery (by Pension Wise), its interaction with the ‘second line of defence’ and issues such as take-up and monitoring of the service.

House of Commons Library publishes briefing paper on pension rights in civil partnerships and same-sex marriages

The House of Commons Library also published a briefing paper on 10 July 2015, looking at the way in which forming a civil partnership or entering into a same sex marriage may affect rights to state, occupational and personal pensions, and at the relevant provisions in current legislation.

TPR publishes employer guide to DB funding code of practice

On 7 July 2015, TPR published a new guide aimed to help employers understand how the code of practice on funding defined benefits applies to them.

The guide is intended to explain how employers should work with trustees in an open and transparent way to reach feasible scheme funding solutions. The guide also highlights the need for trustees to manage risk when setting investment and funding strategies which reflect both the employers’ appetite for risk and ability to fund the scheme now and in the future.

Nortel decision confirmed

Judges in the US and Canada in the joint trial on the allocation of assets in the Nortel case have confirmed the decision first issued in May, which will allow pensioners to stand alongside the company’s other creditors to claim a share of Nortel’s residual assets.

US claimants challenged the decision as inequitable, but the judges in both US and Canadian Courts saw no reason to change their earlier judgments. Justice Newbould of the Supreme Court of Ontario stated: “I see no injustice in the result. I need not repeat what is contained in the reasons for judgment released on 12 May, 2015. Nothing argued on this motion leads me to consider that I erred in any way in those reasons.”