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

• DWP consults on DC bulk transfers without member consent
• European Commission: further extension of temporary clearing exception for pension schemes
• Spring Budget date announced by HMT
• Briefing paper on Savings (Government Contributions) Bill published
• IORP II published in the Official Journal
• PPI issues Briefing Note 86
• TPAS launches online pension scam guidance tool
• TPR reaches settlement in Coats case
• Treasury Committee launches inquiry into effectiveness of monetary policy
• Work and Pensions Select Committee publishes report on DB pension schemes

DWP consults on DC bulk transfers without member consent

On 20 December 2016, the DWP published a call for evidence which seeks to examine how provisions on DC bulk transfers without member consent could be improved.

Among other things, the consultation asks how the current process could be simplified, while ensuring that members are adequately protected. The consultation notes that the Government is particularly interested in:

• transfers from occupational schemes, including views on the role of the actuarial certificate and the relationship between the transferring and receiving schemes
• transfers from stakeholder pension schemes.

The consultation closes on 21 February 2017.

Please see our forthcoming Alert for further details.

European Commission: further extension of temporary clearing exception for pension schemes

On 20 December 2016, the EU Commission adopted a Delegated Regulation amending EMIR (the regulation on OTC derivatives, CCPs and trade repositories) in relation to a further extension of the transitional period for pension scheme arrangements (“PSAs”).

In its related Daily News bulletin, the Commission explains that it is extending the transitional relief for PSAs from central clearing for their OTC derivative transactions until 16 August 2018 (from August 2017). It explains that as PSAs (which encompass all categories of pension funds) “hold neither significant amounts of cash nor highly liquid assets, imposing central clearing requirements on them would require very far-reaching and costly changes to their business model which could ultimately affect pensioners’ income”.

The Commission states that the “upcoming targeted review of EMIR”, announced as part of the Commission’s 2017 work programme, will provide an in-depth opportunity to assess this issue.

The Council of the EU and the European Parliament will now consider the Delegated Regulation. If passed, it will enter into force the day after it is published in the Official Journal of the EU.

Spring Budget date announced by HMT

On 20 December 2016, the Chancellor of the Exchequer, Philip Hammond, announced that the Government will publish its next spring Budget on 8 March 2017. This will be the last Budget to take place in the Spring; as announced at the Autumn Statement 2016, following this year’s spring Budget, future Budgets will be delivered in the autumn.

Briefing paper on Savings (Government Contributions) Bill published

On 22 December 2016, the House of Lords Library published a briefing paper on the Savings (Government Contributions) Bill 2016/17, which provides for the introduction of the Lifetime ISA, as well as Help-to-Save accounts. The paper gives an overview of the key policy background and provisions in the Bill, and a summary of the Bill’s proceedings in the House of Commons.

Following completion of its passage through the House of Commons, the Bill received its first reading in the House of Lords on 13 December 2016. The second reading in the House of Lords, and all remaining stages of the Bill, are scheduled for 12 January 2017.

IORP II published in the Official Journal

The second IORP (or occupational pensions) Directive was published in the Official Journal of the EU on 23 December 2016. It will therefore come into force on 12 January 2017, on which date, its two year implementation period starts to run.

For further information, please see our forthcoming Alert.

PPI issues Briefing Note 86

On 20 December 2016, the PPI issued Briefing Note 86 – “Defined Benefits: Today and Tomorrow”.

The Briefing Note is the first in a series on DB pensions in the private sector. The note explores:

• a brief history of private DB pension provision in the UK
• the complex set of factors behind the decline in DB provision
• the challenges facing sponsors, trustees, government, regulators and members
• the options available to sponsors, trustees, government and regulators to help schemes facing challenges.

TPAS launches online pension scam guidance tool

On 3 January 2017, TPAS announced that it was launching an online scam identification tool – a “self-service option giving information and guidance to those who may initially be too worried or embarrassed to verbalise their concerns”. The tool is also aimed at providing the pensions industry with something to which they can direct their savers, “helping to disrupt the scammers throughout the process but especially at the point of a questionable transfer”.

Lesley Titcomb, Chief Executive at TPR, said: “Scammers destroy lives so we welcome the launch by TPAS of the new online guidance tool to further help people protect their retirement savings. We won’t let up in the fight against scammers and we continue to lead a taskforce of government, regulators, financial services bodies and criminal justice agencies (Project Bloom) to disrupt and prevent scams.”

TPR reaches settlement in Coats case

TPR announced in December 2016 that anti-avoidance action taken in the case of the Coats Group plc has resulted in a payment of £255m from the company.

In 2013 and 2014, TPR issued Warning Notices setting out the case for exercising its Financial Support Direction (“FSD”) power in relation to three DB schemes sponsored by companies within the Coats group.

Pending the outcome of TPR’s case, Coats agreed to suspend intended payments to shareholders of the proceeds from the sale of its former investments. TPR secured a settlement with Coats for two of the schemes covering approximately 90% of the total membership, and will discontinue its anti-avoidance action in respect of those two schemes. The settlement will secure all of the available cash following the sale of Coats’ former investments for scheme members.

Executive Director of Frontline Regulation Nicola Parish said: “This is a substantial settlement of our FSD case where neither the employers nor the targets were insolvent. It shows we can and will use our existing powers against a solvent employer if that is the right thing to do. This case is a great example of how even after [Warning Notices] have been served, TPR, the company and the trustees can work together to achieve a good outcome for members without the need to formally enforce our powers through the Determinations Panel. We will continue to take a commercially-minded and pragmatic approach when pursuing the use of our powers to achieve good outcomes for scheme members. In this case, the settlement will substantially improve the funding of the two schemes and also strengthen the employer covenant supporting those schemes.”

Treasury Committee launches inquiry into effectiveness of monetary policy

On 22 December 2016, the Treasury Committee launched an inquiry into the effectiveness and impact of monetary policy in the UK since 2008.

The terms of reference ask for written submissions to address various points, including the unintended consequences of monetary policy and the implications for the long-term sustainability of pensions and savings income.

The deadline for submissions is 5 March 2017.

Work and Pensions Select Committee publishes report on DB pension schemes

The Work and Pensions Committee’s Sixth Report of Session 2016-17, relating to its inquiry into DB pension schemes, has called for the Government to consult on new enforcement powers for TPR. The report, which was published on 21 December 2016, “proposes an initial set of measures…with a view to reducing the chances of a BHS pension fund style disaster occurring again”.

The Committee suggests that TPR be reformed to a “nimbler, more proactive regulator that could intervene sooner when difficulties in a company pension fund become apparent, and before problems begin to compound.” The Committee’s recommendations include giving TPR an ability to impose punitive fines that could treble the amount currently payable. The report goes on to state, however, that it is expected that “such a fine would never need to be levied in practice, as it would act as such a strong deterrent to avoiding pension responsibilities”. The proposals also include shorter periods for the submission of valuations and recovery plans, and recovery plans of more than 10 years only in “exceptional” circumstances.

The report also goes on to recommend new powers for pension scheme trustees, and considers the recalculation of risk-based levy charged by the PPF.