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

• Pension transfers and early exit charges: consultation
• HMRC updates Pension Schemes Online user guide
• HMT Consultation on public sector exit payments
• HMT and FCA launch Financial Advice Market Review
• EU Parliament report on the draft Pensions Directive
• Ombudsman statement in relation to the Police Pension Scheme
• PPF issues guidance on its approach to pre-pack administrations
• Fifth Edition of PPF Funding Strategy Update published
• TPR Perceptions report released
• TPR releases automatic enrolment compliance data
• Work and Pensions Committee publishes responses to report on auto-enrolment and pension reforms

Pension transfers and early exit charges: consultation

The Government issued a consultation on 30 July 2015, seeking views on options to address possible barriers to people switching their pensions to access the new DC freedoms including, excessive early exit penalties, the transfer process and the circumstances in which someone should seek financial advice.

The consultation notes that, if there is evidence of excessive early exit charges restricting individuals’ abilities to access the new freedoms, the Government will consider imposing a cap on such charges for those age 55 and over.

Alongside this consultation, the FCA and TPR are carrying out a comprehensive evidence gathering exercise, including on the existing processes for pension transfers and any fees and charges that members might incur for leaving their scheme early.

The consultation closes on 21 October 2015. The Government intends to publish a response in the autumn.

For further detail, please see our Alert.

HMRC updates Pension Schemes Online user guide

HMRC has published a revised Pension Schemes Online user guide, which contains detailed and step-by-step instructions for scheme administrators and practitioners on how to use the online service hosted by HMRC. The update includes changes made to reflect new IT process and in relation to the process for amending scheme names.

HMT Consultation on public sector exit payments

HMT has issued a consultation on proposed legislation to cap exit payments for public sector workers. The consultation seeks views on placing a potential £95,000 cap on the total value of payments made to an individual in relation to their exit from public sector employment, for example, on loss of employment due to redundancy. Exit payments are defined to include employer pension contributions, and early access to unreduced pension (where employers bear the cost of ‘buying out’ the actuarial reduction that would normally apply to a pension that was taken early).

The consultation will close on 27 August.

HMT and FCA launch Financial Advice Market Review

On 3 August 2015, HMT and the FCA launched the Financial Advice Market Review.

The review, which builds on the Government’s pension reforms, will examine how financial advice could work better for consumers. Among other things, the review aims to examine:

• the “advice gap” for those without significant wealth
• regulatory and other barriers firms may face in giving advice and how to overcome them
• how to give firms the regulatory clarity and create the right environment for them to innovate and grow
• how to encourage demand for financial advice, including addressing barriers which put consumers off seeking advice.

The review will consider all types of retail financial products, including pensions, savings, mortgages, and insurance. It is due to report ahead of Budget 2016.

EU Parliament report on the draft Pensions Directive

Back in March 2014, the EU Commission published a proposal for a new occupational pension funds directive (see our Alert). Having been subject to scrutiny by the EU Council last autumn, it now falls to the EU Parliament to review the Commission’s draft.

On 28 July 2015, Brian Hayes, the rapporteur of the Parliament’s Economic and Monetary Affairs (ECON) Committee, published his draft report on the Commission’s proposal. The report indicates that the Parliament is minded to introduce a number of changes, including:

• the introduction of a guiding principle to inform the content of pension benefit statements, in place of the prescriptive rules originally proposed
• the removal of the proposed requirement for trustees to have professional qualifications.

While Hayes is also keen to remove obstacles to cross-border activity, on the current wording of the report, there remains a requirement for full funding of new cross-border arrangements.

In addition, the report notes that the further development at EU level “of solvency models, such as the Holistic Balance Sheet (HBS), is not realistic in practical terms and not effective in terms of costs and benefits, particularly given the diversity of institutions within and across Member States.” It goes on to state that no quantitative capital requirements – such as Solvency II or HBS models – should be developed for pension schemes, as “they could potentially decrease the willingness of employers to provide occupational pensions.”

The report is due to be discussed and amended during the autumn.

The NAPF has updated its clause-by-clause analysis of the new IORP Directive, taking into account the draft report’s proposals.

Ombudsman statement in relation to the Police Pension Scheme

The PO has issued a statement regarding police pensions after receiving a number of complaints about whether it was lawful to transfer provisions of the Police Pension Scheme from the Police Pensions Act 1976 to the Public Service Pensions Act 2013.

In the statement, the PO notes that the extent of his jurisdiction means that he can consider complaints of maladministration and look at the actions of those responsible for the management and the administration of pension schemes. The complaint against the Police Federation was that it failed to consult properly about the changes made in respect of the Scheme; however, the Police Federation was not responsible for the management or administration of the Scheme. The PO notes that any complaint against the Police Federation is therefore not within the PO’s jurisdiction, and any challenge to how the changes were made must be dealt with by way of Judicial Review in the Courts.

PPF issues guidance on its approach to pre-pack administrations

The PPF published a guidance note on pre-packaged administrations on 27 July 2015.

The note from the restructuring and insolvency team of the PPF sets out the approach adopted by the PPF to pre-packaged administrations, where the same insolvency practitioner intends to continue as the office holder in the subsequent liquidation or company voluntary arrangement.

The PPF is concerned that meaningful consultation with pension trustees and the PPF is not taking place at an early stage and that transactions are presented as a “given”. The PPF will consider the extent to which a company’s unsecured creditors (and in particular the pension scheme trustees) have been consulted before a pre-pack is undertaken, and if it has concerns, the PPF may seek to appoint an alternative insolvency practitioner.

Fifth Edition of PPF Funding Strategy Update published

On 27 July 2015, following the publication of its 2014/15 Annual Report and Accounts, the PPF published its Funding Strategy Update. This provides further detail on the PPF’s progress toward its funding target and how the risk environment influences this progress.

The PPF states that it believes that its funding strategy remains fit for purpose, and that good progress is being made against it. However, it has noted that “there are clear risks in the current economic climate, and regular monitoring remains essential”.

TPR Perceptions report released

TPR’s latest Perceptions tracker report, published 28 July 2015, reveals that its performance has been rated “very good” or “good” by nearly 80% of respondents.

The report also notes that pensions savers’ awareness of scams remains low, with 13% saying they are unaware of scams completely. TPR therefore continues to urge trustees to communicate with their members about pension scams.

Questions were included this year relating to TPR’s newest statutory objective to minimise any adverse impact on the sustainable growth of an employer. 65% of respondents agreed that “the regulator takes into account the needs of the scheme and the employer in a balanced way” and around three quarters (76%) agreed that “the regulator supports schemes to have a strong and ongoing employer”.

TPR releases automatic enrolment compliance data

On 30 July 2015, TPR published its latest quarterly figures showing that compliance with automatic enrolment duties continues to be the norm. The last bulletin that will primarily represent medium sized businesses who have implemented automatic enrolment, it illustrates that most employers in this group have complied with their duties without the need for TPR to use its powers.

However, with tens of thousands of small and micro employers starting out on their automatic enrolment journey in the coming months, TPR warns of the potential pitfalls and lessons to be learned – in particular showing that employers with seasonal and temporary staff must take care when assessing workers or postponing staff.

The bulletin has been published at the same time as TPR’s updated compliance and enforcement strategy and policy, which details TPR’s approach to identifying, deterring, preventing and tackling non compliance.

Work and Pensions Committee publishes responses to report on auto-enrolment and pension reforms

On 27 July 2015, the Work and Pensions Select Committee published its First Special Report of 2015-16, which contains the Government’s and FCA’s responses to the Committee’s fourth report of session 2014-15 in relation to progress with automatic enrolment and pension reforms.

Amongst other things, Baroness Altmann notes that she is working closely with DWP officials and staff at TPR to simplify the language and process for automatic enrolment. She also remarks, in relation to establishing a single regulator and creating an independent Commission, that “it is important […] that we first focus on the successful roll out of automatic enrolment, pension flexibilities and charges, placing the consumer at the heart of what we are trying to achieve. I believe that Government resources will be better used focussing on this at this time”.

The FCA’s response discusses the regulatory framework, IGCs, and its role in monitoring decumulation (including trial redesigns of the “wake-up packs”). It also references work towards the creation of the ‘Pensions Dashboard’, which would allow consumers to view all of their lifetime pension savings, including accumulated DC savings and state pension entitlements, in one place.