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

• LTA increase confirmed
• CMA progress update on investment consultancy market investigation
• Disclosure of costs, charges and investments in DC occupational schemes: Government response published
• Bulk transfers of defined contribution pensions without member consent: Government response published
• Bulk transfer of contracted out pension rights without member consent: Government response published
• New employer debt option for multi-employer schemes: Government response published
• FAS increased long service cap legislation made
• FCA policy statement on personal recommendations on retail investments
• FCA Handbook Notice 52
• Government responds to Commission report on dormant assets scheme
• HMRC publishes Pension Schemes Relief at Source for Scottish Income Tax Newsletter
• HMRC publishes Countdown Bulletin issue 32
• Pensions Institute publishes “black box thinking” paper
• PPI reports published
• TPR publishes statement on managing service providers
• TPR publishes blog on the Environmental Audit Committee
• TPR launches investigation into schemes suspected of links to cold-calling
• BHS director fined for failing to give information about sale

LTA increase confirmed

On 20 February 2018, the Finance Act 2004 (Standard Lifetime Allowance) Regulations 2018 were made. The regulations confirm the increase in the standard lifetime allowance from £1m to £1,030,000 with effect from the start of the 2018/19 tax year.

The increase is in line with the rise in CPI (3% for the 12 months to the end of September 2017). The lifetime allowance is currently set to continue to rise in future years in line with annual CPI increases, with the figure to be confirmed each year in regulations.

CMA progress update on investment consultancy market investigation

On 21 February 2018, the Competition and Markets Authority (“the CMA”) published a progress update on its investigation into investment consultancy.

The update confirms that the CMA aims to publish its provisional decision report in July 2018, and that it will “soon” begin to publish working papers on some areas of its investigation. A “large quantitative survey of pension trustees”, which gathered evidence on how pension scheme trustees use investment advisory and fiduciary management services and how they view these services, will be published alongside the working papers.

Disclosure of costs, charges and investments in DC occupational schemes: Government response published

The Government has today, 26 February 2018, published the response to its consultation on “Occupational pensions: improving disclosure of costs, charges and investments”.

The consultation related to the Occupational Pension Schemes (Administration and Disclosure) (Amendment) Regulations 2018, which introduce requirements for certain occupational schemes offering money purchase benefits to publish charge and transaction cost information, disclose this to members and others, and tell members where to find it; and to provide information, if a member or a recognised trade union asks, about the pooled funds in which they are invested.

The response confirms that the Government will proceed with its proposals, but with a number of changes made in light of the feedback received. The regulations will come into force on 6 April 2018.

It also published “Cost and charge reporting: guidance for trustees and managers of occupational schemes” at the same time. The regulations require trustees and scheme managers of certain occupational pension schemes offering money purchase benefits to, amongst other things:

• provide an illustrative example of the cumulative effect of the pension scheme fund charge and transaction costs incurred by a member
• publish this, along with other relevant information on a publicly available website free of charge – and tell members where it can be found

The Government expects trustees and managers of the relevant occupational pension schemes to have regard to this guidance in meeting the legislative requirements.

The Government confirms that they are liaising closely with the FCA “as they prepare their own rules for disclosure and publication by workplace personal pension schemes”. The FCA has confirmed it intends to consult on equivalent rules in the second quarter of 2018.

Bulk transfers of defined contribution pensions without member consent: Government response published

Also published by the DWP today, 26 February 2018, is its response to the consultation on the Occupational Pension Schemes (Preservation of Benefits and Charges and Governance) (Amendment) Regulations 2018.

The consultation sought views on the regulations, which are intended to simplify the bulk transfer of DC pensions without member consent, removing the requirement to obtain an actuarial certificate for bulk transfers of occupational DC to DC pensions and replacing it with an alternative test and new member protections.

The response confirms that the Government will proceed with its proposals, but with a number of changes made in light of the feedback received. The regulations will come into force on 6 April 2018.

Bulk transfer of contracted out pension rights without member consent: Government response published

The DWP has also today, 26 February 2018, published its response to the consultation on The Contracting-out (Transfer and Transfer Payment) (Amendment) Regulations 2018.

The consultation sought views on regulations intended to enable bulk transfers of contracted-out rights in certain circumstances without member consent, to schemes that have never been contracted out.  The response confirms that the Government will proceed with its proposals, but with a number of technical changes made in light of the feedback received.

The regulations have been made and laid, and will come into force on 6 April 2018.

New employer debt option for multi-employer schemes: Government response published

A fourth response published today, 26 February 2018, is the DWP’s to the consultation on the Occupational Pension Schemes (Employer Debt) (Amendment) Regulations 2017.

The consultation sought views on regulations that introduce a new option designed to enable employers in multi-employer pension schemes to defer the requirement to pay an employer debt on ceasing to employ an active member. The deferred debt arrangement is subject to a condition that the employer retains all their previous responsibilities to the scheme.

The response confirms that the Government will proceed with its proposals, via regulations now to be called The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2018, but with a number of changes made in light of the feedback received. The regulations have been made and laid, and will come into force on 6 April 2018.

FAS increased long service cap legislation made

On 20 February 2018, the Financial Assistance Scheme (Increased Cap for Long Service) Regulations 2018 came into force.

The regulations amend the Financial Assistance Scheme Regulations 2005, to provide for a revised FAS cap which depends on a person’s length of pensionable service when they first become entitled to an annual payment or to an ill-health payment under the scheme. The standard amount, calculated in the same way as the current cap, will apply to anyone with pensionable service of less than 21 years. For anyone with 21 years or more pensionable service, the FAS cap will be increased by 3% of the standard amount for each full year over 20 years, to a maximum of double the standard amount. The standard amount will continue to apply in the case of initial and interim ill health payments under the Scheme.

FCA policy statement on personal recommendations on retail investments

On 23 February 2018, the FCA published a policy statement relating to perimeter guidance on personal recommendations on retail investments, including on the selection, consolidation or transfer of pension products, and which contains final Handbook Guidance. This follows on from the publication of the FCA’s final report into the asset management sector (“FAMR”).

Alongside the policy statement, the FCA has also published a consumer guide on understanding advice and guidance on investments, designed to help consumers seek support when making decisions about some investment, pension and insurance products.

FCA Handbook Notice 52

On 23 February 2018, the FCA published Handbook Notice 52, which sets out recent changes made to the FCA Handbook.

Among other things, the update to the Handbook notes that, following consultation, the Financial Services Compensation Scheme (Transitional Levy Provisions) Instrument 2018 has amended the Glossary and Fees manual to correct an unintended implication of a change to FSCS funding arrangements.

The instrument and subsequent Handbook change ensure that the life and pensions intermediation class will continue to benefit from support from the retail pool over the next few months. The instrument comes into force on 1 April 2018, with transitional provisions in force from 23 February 2018.

Government responds to Commission report on dormant assets scheme

The Government (via the DDCMS and HMT) has published its response to the Commission on Dormant Assets’ Commission’s report on the existing dormant assets scheme.

The Commission had recommended that the current scheme, which includes funds in banks and building societies, should be expanded to include a much wider range of financial assets including unclaimed proceeds from life insurance and pensions products.

In its response, among other things, the Government states that it believes there is substantial potential for dormant insurance and pension products to be included in the scheme, and notes strong interest from firms in participating in an expanded scheme. The Government encourages firms to further consider how insurance and pension products could be included in an expanded scheme.

The Government states that it will now engage “industry champions” representing the banking, insurance and pensions, investment and wealth management, and securities sectors, who will be asked to focus on ensuring appropriate approaches to dormant assets are in place across the industry, improving tracing and reunification, building participation in the current scheme and considering options to expand the scheme to other asset types. The champions will work with firms in their sector, trade associations and regulatory bodies. The Government will then decide on any potential legislative amendments required to enable an expanded dormant assets scheme.

HMRC publishes Pension Schemes Relief at Source for Scottish Income Tax Newsletter

On 21 February 2018, HMRC published a Pension Schemes Relief at Source for Scottish Income Tax Newsletter. The Newsletter updates stakeholders on the implications of the Scottish Budget 2018/19 for pension schemes and their members in relation to the Relief at Source mechanism, giving information on new Scottish income tax rates and bands for the 2018/19 tax year, and how tax relief will apply in practice.

The new Scottish Income Tax rates and bands for the 2018/ 2019 tax year were confirmed on 21 February 2018, and will apply from 6 April 2018.

HMRC publishes Countdown Bulletin issue 32

On 23 February 2018, HMRC published issue 32 of its “Countdown Bulletin”, which provides important information for schemes following the ending of DB contracting-out.

This latest edition of the bulletin includes information on termination and transfer notices, and Contributions Equivalent Premium (“CEP”) or Limited Revaluation Premium (“LRP”) refunds due to post 5 April 2016 transfers.

Pensions Institute publishes “black box thinking” paper

The Pensions Institute has published a report, “Bringing Black Box Thinking to the Pensions Industry”, which proposes a “new approach to the way trustee boards recognise and evaluate mistakes” in DB schemes.

The report seeks to address “three key questions”:

• what mistakes are being made by DB trustee boards today? What are the errors that emerge in strategy setting that Black Box Thinking can be applied to?
• how do boards evaluate errors? Do boards have a culture of recognising and measuring errors and are they able to learn from their mistakes to improve future decision making?
• ways to improve. Based on the analysis, what can schemes do?

PPI reports published

The PPI has recently published two reports. The first, Automatic enrolment in the gig economy, (commissioned by Zurich), modelled theoretical retirement incomes of gig economy workers.

The second, commissioned by the TUC, looks at investment market volatility, analysing the impact of investment market performance upon the retirement outcomes for savers in DC schemes. It examines both historical returns, and the uncertainty caused by unknown future investment returns.

TPR publishes statement on managing service providers

TPR has published a statement which summarises its expectations of good practice by trustees and scheme managers on the management of service providers, and planning for events which could have major consequences for schemes, including the failure of service providers.

TPR publishes blog on the Environmental Audit Committee

TPR has published a blog by Anthony Raymond, Acting Executive Director of Regulatory Policy, on TPR’s evidence at the Environmental Audit Committee’s Green Finance inquiry.

The blog states that “evidence given to the inquiry has been that not all pension trustees appreciate the financial risk presented by climate change; some trustees are taking a leadership role but others are resistant to change or underestimate the financial impacts on their pension scheme”. The blog goes on to state that the impact of climate change is a risk that “trustees need to consider and act upon”, and that TPR welcomes the inquiry and will continue to work with the pensions and broader financial sector on these issues.

TPR launches investigation into schemes suspected of links to cold-calling

TPR has announced that, together with the police, it has launched an investigation into a number of pension schemes suspected of being linked to cold-calling.

As part of the same investigation, TPR has also appointed an independent trustee to run a scheme over concerns about the management of more than £3 million of funds.

Mike Birch, TPR’s Director of Case Management, said: “Cold-calling pension holders isn’t illegal yet, but no reputable business does it. We would urge anyone to contact Action Fraud if they are phoned and offered the chance to transfer their pension. Our message is simple – a cold-call about your pension is an attempt to steal your savings.”

BHS director fined for failing to give information about sale

TPR has confirmed that Dominic Chappell has been fined £87,000 (a £50,000 fine, £37,000 costs and a £170 victim surcharge) for failing to provide information that TPR had required him to supply as part of its investigation into the sale and collapse of BHS, using powers under section 72 of the Pensions Act 2004.

Judge Lucie said: “The court must send a message to those in senior positions that refusal to answer questions under section 72 will not be tolerated. The law is there for a purpose and it must be enforced.”

The case is the fifth criminal conviction secured by TPR against individuals or organisations for failing to comply with section 72 notices.

TPR’s separate anti-avoidance action against Mr Chappell in respect of the BHS pension schemes is continuing.