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

• Financial Services and Markets Act 2000 (Early Exit Pension Charges) Regulations 2016 published
• Registered Pension Schemes (Provision of Information) (Amendment No 2) Regulations 2016 published for consultation
• Consultation on draft National Health Service Pension Scheme (Amendment) Regulations 2017
• Amended Civil Service Compensation Scheme laid before Parliament
• Updated briefing paper on Savings (Government Contributions) Bill published
• Law Commission call for evidence on pension funds and social investment
• OECD finalises revised core principles of private pension regulation
• ONS confirms CPIH as preferred measure of consumer price inflation
• PLSA calls on FTSE 350 companies to improve reporting on their workforces
• PPI publishes report on automatic enrolment changes
• PPI publishes Briefing Note 85

Financial Services and Markets Act 2000 (Early Exit Pension Charges) Regulations 2016 published

The Financial Services and Markets Act 2000 (Early Exit Pension Charges) Regulations 2016 (2016/1079) were laid before Parliament on 9 November 2016, together with an explanatory memorandum.

The regulations specify charges that are not to be treated as early exit charges for the purposes of the FCA’s cap on early exit charges on individuals looking to access their retirement benefits flexibly from “relevant pension schemes”.

The regulations deal in particular with Market Value Adjustments (“MVAs”). MVAs (sometimes also referred to as Market Value Reductions) are generally found in “with profits” or similar products, offered by insurers directly to members through personal pension schemes or indirectly through occupational pension scheme investments. They are reductions that may be made to the nominal value of a member’s pension benefits when they exit a pension scheme early in order to more closely align them with the market value of the assets which those benefits are comprised of at the point at which the member exits the scheme.

The Government made it clear (in its original consultation on “Pension transfers and early exit charges” (July 2015), its response, and the follow up consultation in 2016) that MVAs should not be treated as exit charges for the purpose of the FCA cap. These regulations therefore provide that MVAs will not be treated as early exit charges, provided certain conditions are met.

The regulations are due to come into force on 31 March 2017.

Registered Pension Schemes (Provision of Information) (Amendment No 2) Regulations 2016 published for consultation

On 7 November 2016, HMRC published the draft Registered Pension Schemes (Provision of Information) (Amendment No 2) Regulations 2016 and a draft Explanatory Memorandum for consultation. The draft Regulations make changes to the Registered Pension Schemes (Provision of Information) Regulations 2006.

When a lump sum death benefit is paid to a trust, the draft regulations require scheme administrators to provide information to the trustee on the amount of lump sum death benefit and tax paid by the scheme administrator. The draft regulations also require trustees to pass on the same information if they then use the lump sum death benefit to make a payment to an individual beneficiary of the trust. This aims to ensure the trust beneficiary has the information they need in order to claim a refund of the excess tax paid by the scheme administrator over and above the tax at their marginal rate.

The regulations also make minor changes to the existing information requirements relating to the annual allowance taper introduced on 6 April 2016.

The consultation closes on 5 December 2016.

Consultation on draft National Health Service Pension Scheme (Amendment) Regulations 2017

On 10 November 2016, the Department of Health published a consultation seeking views on introducing an administration levy that all employers who participate in the NHS Pension Scheme will be obliged to pay.

The draft National Health Service Pension Scheme (Amendment) Regulations 2017 were published alongside the consultation document.

The consultation closes on 9 January 2017, with the aim of introducing the levy from 1 April 2017.

Amended Civil Service Compensation Scheme laid before Parliament

On 8 November 2016, the Minister for the Cabinet Office, Ben Gummer, made a Written Ministerial Statement in Parliament announcing reforms to the Civil Service Compensation Scheme (“CSCS”).

The changes to the CSCS align it with wider compensation reforms across the public sector, with the aim of “giving the Civil Service an effective, cost-efficient system to help civil servants leave when exits are needed”. It follows the Government’s response to the consultation on the CSCS published on 26 September 2016, and negotiations with relevant trade unions.

The reforms took effect from 9 November 2016.

Updated briefing paper on Savings (Government Contributions) Bill published

On 10 November 2016, the House of Commons Library published an updated version of its briefing paper on the Lifetime ISA and Help to Save Accounts debates, summarising the proceedings of the Savings (Government Contributions) Bill during its committee stages.

Law Commission call for evidence on pension funds and social investment

On 8 November 2016, the Law Commission published a call for evidence on pension funds and social investment. The project builds on the Law Commission’s 2014 report, Fiduciary Duties of Investment Intermediaries (see our Alert) which summarised the law governing pension investment, and provided guidance to pension trustees on when they could take environmental and social factors into account.

The Minister for Civil Society, Rob Wilson MP, has asked the Law Commission to look further at social investment by pension funds. The call invites views on social investment by pension funds and in particular, whether there are any legal or regulatory barriers to social investment.

Responses should be submitted by 15 December 2016. A report is due by May 2017.

OECD finalises revised core principles of private pension regulation

The OECD has published revised core principles of private pension regulation. The revision updates the 2004 Recommendation of the Council on Core Principles of Occupational Pension Regulation and aims to increase the relevance of the core principles in the light of current practices and developments.

The purpose of the core principles is to give governments and regulators worldwide a common benchmark and high-level guidance on the design and operation of private pension systems. The update aims to provide operative guidance on how to implement private pension provision effectively and efficiently, while addressing the lessons learnt from the turmoil financial markets experienced over the past few years. It is also intended to improve consistency with other OECD legal instruments and policy guidance.

A consultation on a revised version of core principles was launched in July 2015.

ONS confirms CPIH as preferred measure of consumer price inflation

On 10 November 2016, the Office for National Statistics published a statement by the National Statistician and Chief Executive of the ONS, John Pullinger, confirming that CPIH (the Consumer Price Index including owner occupiers’ housing costs) will be made the preferred statistical measure of consumer price inflation in the UK.

The ONS intends that this change should take place from March 2017, with the ONS ceasing publication of RPIJ from that date.

It remains to be seen whether the Government will follow suit and choose CPIH its preferred measure of consumer price inflation, a move which could affect statutory pension indexation.

PLSA calls on FTSE 350 companies to improve reporting on their workforces

The PLSA announced on 7 November 2016 that it has written to the Chair of every FTSE 350 company, asking them to share fuller information with investors about the culture and working practices of their workforces.

The letter, supported by Pensions Minister Richard Harrington MP (amongst others), highlights how the management and engagement of the workforce can have a material effect on a company’s performance over the long-term.

PLSA Chief Executive, Joanne Segars, said: “It’s essential that pension funds know more about how the companies, in which they invest, manage and engage their employees. We know that engaged workers make for stronger companies and stronger companies make for better investment returns – creating an economy that works for everyone. So that’s why we’re calling on companies to make more information about their workforces available to pension funds and other investors.”

PPI publishes report on automatic enrolment changes

On 8 November 2016, the PPI published a report, commissioned by NOW: Pensions, ahead of the DWP’s 2017 review of automatic enrolment.

The report models a selection of scenarios looking at the effect of removing the auto-enrolment earnings trigger (for establishing eligibility) and qualifying earnings band (for calculating contributions).

The research does not make recommendations as to the direction of future policy, but is designed to provide independent evidence and analysis to help improve the discussion and debate on the automatic enrolment thresholds.

PPI publishes Briefing Note 85

On 14 November 2016, the PPI published Briefing Note 85 – Engagement of young adults with pension saving.

The Briefing Note explores barriers to engagement for young people and the ways in which negative perceptions of ageing can impede engagement with pension saving. It also outlines how tackling these psychological barriers can be used as part of effective financial advice.