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

• ACA Pension Trends Survey 2017 – second interim report
• DWP consults on the disclosure of costs, charges and investments in DC occupational schemes
• Consultation on changes to DC bulk transfers without consent
• DWP publishes Pension Charges Survey
• FCA publishes guidance on how to calculate redress for unsuitable DB pension scheme transfers
• Flexible Payments from Pensions: HMRC statistics
• PPF publishes Statement of Investment Principles
• TPR publishes blog on evolution of pension scams
• Safeway v Newton & ors (Court of Appeal)

ACA Pension Trends Survey 2017 – second interim report

The ACA has released the second interim report from its Pension Trends Survey conducted over the summer amongst employers.

The findings include:

• a surge in transfer requests from DB schemes, “placing enormous pressures on scheme administration”. Nearly half of the DB sponsors surveyed say the incidence of transfer requests exceeds 5% of scheme members
• alongside other costs associated with “freedom and choice”, transfer value activity is adding between 10-20% to scheme administration costs
• 61% of employers say members are having difficulty in finding advisers prepared to advise on pension transfers.

The initial report on the survey’s findings was published in September; the final report is due in November 2017.

DWP consults on the disclosure of costs, charges and investments in DC occupational schemes

On 26 October 2017, the DWP launched a consultation seeking views on the policy and proposed regulations for how costs and charges information should be published and made available to members; and for members to request information about the funds in which their money is invested.

The DWP proposes to extend the contents of the Chair’s annual governance statement to include more detailed information on costs and charges, including an illustration of the compounding effect they have on members’ pension savings. Trustees will be required to publish costs and charges information on the internet for public consumption; for schemes and employers that do not have their own website, the DWP suggests that “a low burden solution could be to utilise cloud services or online tools, where the documents could be uploaded and the link shared for members to view.” The FCA intends to consult on corresponding rules for workplace personal pension schemes in 2018.

The DWP is also consulting on a proposal to impose a duty on trustees to disclose certain information on a scheme’s pooled funds to members and recognised trade unions, on request.

Members will be notified, via their annual benefit statements, where they can find the costs and charges information on the web, and that they can request information on the scheme’s pooled funds.

Draft statutory guidance and regulations were published alongside the consultation, which runs until 5pm on 6 December 2017. The regulations are due to come into force on 6 April 2018.

Please see our Alert for further details.

Consultation on changes to DC bulk transfers without consent

On 26 October 2017, the DWP issued a consultation seeking views on draft regulations to simplify the requirements for DC to DC bulk transfers without consent.

Under the proposals, the current safeguards to transfers without consent would be removed and replaced with new member protections. In particular, the DWP proposes that members who are protected by the default fund charge cap in their current scheme should remain subject to such protection following any transfer without consent, whether between schemes or between funds or arrangements. The proposed changes will not apply to DB schemes or to DC schemes with guarantees.

The consultation closes at 5pm on 30 November 2017. The Regulations are intended to come into force with effect from 6 April 2018, subject to Parliamentary approval.

Please see our forthcoming Alert for further detail.

DWP publishes Pension Charges Survey

On 26 October 2017, the DWP published a report summarising how charges in DC workplace pension schemes have changed since measures were introduced in April 2015 and April 2016. The measures included the charge cap on default arrangements, and the bans on consultancy charges, Active Member Discounts (“AMDs”) and member-borne commission.

Key findings from the report included that:

• following the introduction of the default charge cap, 98% of members of qualifying (ie schemes used for automatic enrolment) contract-based schemes and 99% of members of qualifying trust-based schemes now paid a maximum of 0.75%
• non-qualifying schemes, whose charges are not subject to the cap and were already typically higher than it, had not generally brought down their charges in response
• “legacy” charges that were banned under the charges measures (i.e. AMDs, consultancy charges and member-borne commission) had been eliminated from qualifying schemes, and remained extremely rare even among non-qualifying schemes
• there had been virtually no improvement in providers’ abilities to report on transaction costs compared to 2015, with many providers, unbundled scheme trustees and their fund managers awaiting further guidance on the issue.

FCA publishes guidance on how to calculate redress for unsuitable DB pension scheme transfers

On 27 October 2017, the FCA published finalised guidance on how to calculate redress for unsuitable pension transfers from DB pension schemes to personal pensions. This follows a public consultation and a review by PWC of the existing methodology.

The final guidance is designed for use by companies that receive a complaint about advice they gave to transfer all or part of the cash value of accrued benefits under a DB pension scheme into a personal pension scheme. It contains assumptions which should be used to calculate the appropriate redress.

Flexible Payments from Pensions: HMRC statistics

HMRC published updated statistics on 25 October 2017, in relation to the number and value of flexible payments made from pension arrangements since the ability to access benefits flexibly was introduced in April 2015.

The figures show that nearly 2.75 million payments have been made since the pension freedoms were launched, with 198,000 people accessing £1.59 billion flexibly from their pension pots over Q3 of 2017. This brings the total amount of money withdrawn from pensions to £14.2 billion since April 2015.

PPF publishes Statement of Investment Principles

The PPF has published its Statement of Investment Principles, which outlines the principles and policies governing determinations about investments made by or on behalf of the PPF Board in the management of the Fund’s assets. This Statement also reflects the Myners principles for institutional investment decision-making.

TPR publishes blog on evolution of pension scams

TPR published a blog on 23 October 2017 discussing how pension scams have evolved, with an increase in “legal scams” being seen.

Written by guest blogger Michelle Cracknell, Chief Executive of TPAS, the blog notes that members are now frequently being persuaded to transfer money into legal pension wrappers, which then buy a “legal but wholly unsuitable” investment, or simply to transfer money out of pensions into unsuitable investments. The blog calls on the industry to raise customer awareness of scams.

In the same week, the FCA urged the public to report fraudulent investment schemes, as new research showed more than 22% of over 55s surveyed who suspected they have been contacted about a fraudulent investment in the last three years, did not tell anyone about it.

Safeway v Newton & ors (Court of Appeal)

The Court of Appeal has referred a question to the CJEU in proceedings brought by Safeway Limited (“Safeway”) regarding the retrospective equalisation of normal pension age (“NPA”) in its DB pension scheme.

Please see our case report for further details.