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

• ABI action plan on pension reforms
• Baroness Altmann’s first speech
• Frank Field to chair Work and Pensions Select Committee
• EIOPA publishes additional stress test documentation
• FRC welcomes EU Commission’s Report on the evaluation of the IAS Regulation
• HMRC temporarily suspends ROPS list
• HMRC publishes June 2015 NISPI Countdown bulletin
• HM Treasury: Chancellor announces consultation into charge cap on pension withdrawal
• Creating a Secondary Annuity Market – industry responses
• House of Commons Library publishes pensions flexibilities briefing paper
• IASB launches a public consultation on pension accounting changes
• PPF takes steps to bring assets in-house

ABI action plan on pension reforms

On 19 June 2015, the ABI published a letter to the Chancellor of the Exchequer and the FCA on pension reform measures.

The letter states that the ABI is concerned that implementing the law and regulatory requirements for reforming workplace pension provision in the UK is “not enough to ensure the benefits of the reforms can be universally felt”.

The letter contains an action plan with suggestions for improving implementation and dealing with challenges associated with the pension reforms.  One suggestion is the creation of a new “customer control” mechanism, which would allow customers to access their pension savings without having to pay for advice. The ABI envisages that this mechanism would be delivered via Pension Wise or TPAS, and would be contained in a protocol agreed with the FCA and FOS.

Baroness Altmann’s first speech

The Minister for Pensions made her maiden speech to the House of Lords on 18 June 2015, on proposed reforms to state and private pension systems. Baroness Altmann noted that “the reforms put in place so dedicatedly by my predecessor in the last government are now reaching a critical stage”.  She defended the pension reforms in general, but warned that “the real tests for success are still to come”, noting that consumer rights must not “play second fiddle to the interests of large financial firms.” She also announced that there would be a wide and independent review of the State Pension age by 2017.

Frank Field to chair Work and Pensions Select Committee

Frank Field MP has been elected chairman of the Work and Pensions Select Committee following a ballot of MPs. The Labour MP for Birkenhead previously served as chairman of the Social Security Select Committee from 1990 to 1997, Minister for Welfare Reform and, in 1999, was involved in setting up the Pensions Reform Group aimed at abolishing pensioner poverty.

EIOPA publishes additional stress test documentation

Following the launch of its occupational pensions stress test and quantitative assessment on solvency, on 17 June 2015 EIOPA published its second set of questions and answers, as well as an updated DC module reporting template and DC calculation tool.

For further detail on the stress test and quantitative assessment, please see our 7 Days dated 18 May 2015.

FRC welcomes EU Commission’s Report on the evaluation of the IAS Regulation

On 19 Jun 2015, the European Commission adopted a report on the evaluation of its regulation on the application of International Financial Reporting Standards (the IAS Regulation). The Commission concluded that adoption of IFRS had been largely beneficial and contributed to greater transparency, quality and consistency of corporate reporting by companies in Europe, and enabled meaningful comparisons to be made by investors.

The Commission’s conclusions were reached after extensive stakeholder research and outreach, and following the views of a panel of experts that included representatives of the FRC.

HMRC temporarily suspends ROPS list

Following recent legislative changes, HMRC wrote to overseas pension schemes asking them to confirm whether they continue to meet the requirements to be a “Qualifying Recognised Overseas Pension Scheme” (QROPS).  With the deadline for responding having lapsed on 17 June, HMRC has temporarily suspended its overseas pension schemes list until 1 July 2015.  We understand that some advisers have halted overseas transfers until the new list is published.

HMRC explains the development in Pension Schemes Newsletter 69 (dated 15 June 2015) and notes that the reformatted list will look significantly different.

As well as needing to satisfy conditions relating to regulation and tax treatment, following legislative changes made with effect from 6 April 2015, a QROPS must generally satisfy the “Pension Age Test” (there are certain limited exceptions to this condition).  In connection with this, Newsletter 69 explains that HMRC has become aware that certain pension schemes that have appeared on previous lists do not meet the Pension Age Test.  Such schemes will not be included on the list on its return.  Reliance should therefore not be placed on previous ROPS listings.

As HMRC explains, ROPS lists published after 6 April 2015 contain revised information designed to reflect more accurately the content of the list.  The list is not, and never has been, a list of Qualifying Recognised Overseas Pension Schemes (QROPS), rather it is a list of the overseas entities that have:

• notified HMRC they are a Recognised Overseas Pension Scheme (ROPS)
• made certain commitments with regard to reporting matters to HMRC
• been issued with a reference number from HMRC
• requested publication on HMRC’s website.

As HMRC notes, checking that a scheme is on the ROPS list is only part of the due diligence which needs to be undertaken by trustees towards satisfying themselves that a scheme is a QROPS.

Newsletter 69 also confirms that forms APSS251- Recognised Overseas Pension Scheme notification and APSS253 – payments in respect of relevant members which relate to overseas pension schemes have been updated since the pension flexibility changes of 6 April 2015.  It should be noted that the “QROPS Online System” has not been updated – schemes should use the forms on GOV.UK.

For further information, please see our Alert: Recognised Overseas Pension Schemes – HMRC’s list (19 June 2015).  If you have any questions regarding these developments, please speak to your usual Sackers contact.

HMRC publishes June 2015 NISPI Countdown bulletin

HMRC’s latest “countdown bulletin” published on 19 June 2015 provides additional guidance on the ending of DB contracting-out in April 2016.

HM Treasury: Chancellor announces consultation into charge cap on pension withdrawal

At Prime Minister’s Questions on 17 June 2015, Chancellor George Osborne announced that a consultation will be launched in July, looking at options designed to strengthen people’s rights to access their pensions flexibly and removing any unjustifiable barriers to doing so. He said that the Treasury will consult to ensure that people are treated fairly when moving their pension to a company that offers them options for accessing their pension savings flexibly.

In particular, the consultation will look at:

• options to address any excessive early exit penalties, including an option to impose a legislative cap on such charges for those aged 55 or over
• ways to make the process for transferring pensions from one scheme to another quicker and smoother, to help people make use of the new freedoms.

Meanwhile, the FCA has stated that it will, in tandem with HMT’s consultation, gather information from providers with a view to understanding the scale of the issues currently facing individuals who want to transfer their pension to a different provider.

Creating a Secondary Annuity Market – industry responses

Back in March 2015, HM Treasury and the DWP issued a consultation on proposals to create a secondary annuity market.

The NAPF published a response to the consultation on 18 June 2015, broadly supporting the suggested regime, but expressing concern that key structural issues would make it extremely challenging for a fair and balanced market to develop.  In their response, the NAPF made various recommendations which they would like to see taken on board if the Government proceeds with the proposals, centering on consumer protection using  independent financial advice and ensuring that people are fully appraised of their rights.

The ACA similarly responded on 18 June 2015, also noting “a number of substantial risks to consumers and sellers (and ultimately the industry) of introducing a secondary annuity market without robust safeguards and sufficient lead-in time to get this right”.  In addition, the ACA raised concerns relating to the precise definitions to be used, and which annuities should be included.

House of Commons Library publishes pensions flexibilities briefing paper

On 18 June 2015, the House of Commons Library published a briefing paper on the pension flexibilities which became available in April 2015. The paper examines the development of the new policies, their expected impact, and issues such as the prevention of tax avoidance and the transfer of safeguarded benefits.

IASB launches a public consultation on pension accounting changes

The IASB launched a consultation on 18 June 2015 proposing amendments to its pension accounting requirements. The proposed changes are designed to improve information to investors and address diversity in practice. The consultation is open until 19 October 2015.

PPF takes steps to bring assets in-house

The PPF is taking steps to remove assets from external fund managers. The fund previously outsourced the administration of £20bn in assets, paying £79m in asset management fees in 2013, and is now determined to manage its own investments.

Alan Rubenstein, Chief Executive of the PPF, said: “The board has pushed the button on allowing us to begin bringing investment management in-house. We will start with our liability-driven investments and then look at bringing in other assets classes, in particular fixed income.”