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

• Enterprise Bill 2015-16
• EIOPA: Term of office extended for chairman
• EU Commission action plan for Capital Markets Union
• FCA to update rules in light of recent pension reforms
• Government Office for Science publishes “Future of Ageing” reports
• HMRC: new ROPS guidance and updated list of recognised overseas pension schemes published
• HMRC issues latest “Countdown bulletin” on the abolition of DB contracting-out
• HMRC publishes Pension Schemes Newsletter 72
• House of Commons Library publishes briefing paper on auto-enrolment since 2010
• NEST marks three year anniversary of automatic enrolment
• PPI publishes Briefing Note 76 – Financial education and retirement: international examples

Enterprise Bill 2015-16

The Enterprise Bill currently before Parliament is designed to promote enterprise and economic growth, as well as to cut red tape, with the aim of making Britain “the best place in Europe to start and grow a business”.

A key feature of the Bill is that it will restrict exit payments in relation to public sector employment, which include employer pension contributions and early access to unreduced pensions. This comes in the wake of HM Treasury’s consultation on public sector exit charges, the response to which was published on 17 September 2015 (see 7 Days dated 21 September 2015 for more details).

On 1 October 2015, BIS published a memorandum identifying provisions of the Bill which grant powers to make delegated legislation. In the context of public sector exit payments, it explains the addition of new provisions to the Small Business, Enterprise and Employment Act 2015 in relation to the new cap of £95,000 on public sector exit payments.

EIOPA: Term of office extended for chairman

On 1 October 2015, EIOPA’s Board of Supervisors announced the extension of the term of office for current Chairman, Gabriel Bernadino, for a further five years, from 2016 to 2021.

The Board notes that its decision is based on the evaluation of Mr Bernadino’s work and the results achieved over his initial five year term, as well as on EIOPA’s duties and requirements for the upcoming years.

The extension of Mr Bernardino’s term of office is subject to confirmation by the European Parliament.

EU Commission action plan for Capital Markets Union

On 30 September 2015, the EU Commission published its Action Plan for the Capital Markets Union, in a bid to boost business funding and investment financing.

Among other things, the Commission intends to assess the case for a policy framework to establish European personal pensions and whether EU legislation is required to underpin a market for “simple, efficient and competitive” personal pensions.

The Action Plan notes that “At present, no effective single market for ‘third pillar’ personal pensions exists. A patchwork of rules at EU and national levels stands in the way of the full development of a large and competitive market for personal pensions”. The Commission considers that “a larger, ‘third pillar’ European pension market would also support the supply of funds for institutional investors and investment into the real economy.” It is intended that this assessment will be carried out by Q4 2016.

In addition, in 2017, the Commission plans to review the taxation of pension funds and life companies around the EU, which it sees as a potential barrier to cross-border investment. It also intends to promote best practice in this area and to develop a code of conduct with Member States on withholding tax relief principles.

FCA to update rules in light of recent pension reforms

The FCA published consultation paper CP15/30 on 1 October 2015, on changes to its rules and guidance in the context of recent pension reforms.

Leading up to the consultation, the FCA conducted a review of its rules and guidance, as a result of which the consultation now covers, among other things:

• the FCA’s expectations about how its existing rules and guidance operate in the new environment
• proposals for further changes to the FCA Handbook, to ensure the FCA’s rules remain fit for purpose
• a request for views on the range of information that the FCA intends to examine as part of the follow-up to its market study
• discussion on areas for further work.
• The consultation includes a draft version of the Conduct of Business (Pensions Supplementary Rules) Instrument 2015.
• The FCA invites responses on the proposed rules to be submitted using its online response form by 4 January 2016. Details for submission of responses in writing or by email can be found on page 3 of the consultation document.
• Anyone wishing to comment on the Retirement Outcomes Review should do so by 30 October 2015 – contact details for responding are also set out on page 3 of the consultation.

Government Office for Science publishes “Future of Ageing” reports

On 28 September 2015, the Government Office for Science published three reports which look at whether people will have enough income in retirement. The reviews were commissioned as part of the UK government’s Foresight “Future of an Ageing Population” project.

The average age of the UK population is expected to increase significantly over the coming decades. This change will bring both challenges and opportunities for central and local government, with impacts on a wide range of public services. The “Future of an Ageing Population” project is intended to provide state of the art scientific evidence to government, which will form the basis for a range of policies and actions to:

• maintain wellbeing throughout life, for all individuals regardless of their generation
• improve quality of life for older people and enable them to participate more fully in society
• ensure everyone can access the tools and facilities to help them live a long and healthy life.

The first report examines evidence on the economic fortunes of cohorts that reach 65 in 2025 and 2040 and the likely adequacy of their retirement income.

The second explores the challenges facing the retirement income market over the next few decades, focusing particularly on how people might convert pension savings into income and exploring the characteristics of people reaching SPA in 2025 and 2040.

The third report focuses on the ageing workforce and how organisations are dealing with the impact.

HMRC: new ROPS guidance and updated list of recognised overseas pension schemes published

On 1 October 2015, HMRC’s list of ROPS list was updated to add six new schemes. At the same time, HMRC published updated guidance on:

• the management of overseas pension schemes, including the different types of overseas pension schemes and what they need to report to HMRC
• the notification and re-notification of recognised overseas pension scheme status – this has been updated to include an explanation of the ROPS re-notification process
• general reporting requirements for ROPS, including pension inputs for AA purposes, benefit crystallisation events for relevant migrant members in relation to the LTA, and the need to provide a flexible access statement when use has been made of the new pension freedoms in a QROPS.

In addition, small changes have been made to form APSS 251 (republished on 2 October 2015, together with its accompanying notes), which must be used to notify HMRC that a scheme is a ROPS. The changes have been made to ensure that the purposes of the form are more accurately reflected.

HMRC issues latest “Countdown bulletin” on the abolition of DB contracting-out

On 30 September 2015, HMRC issued its latest contracting-out countdown bulletin.   Issue 10 provides further guidance for pension scheme administrators ahead of the end of contracting-out on 5 April 2016.

The bulletin includes a reminder that schemes must send an expression of interest to use the Scheme Reconciliation Service (SRS) before 5 April 2016. The SRS allows pension scheme administrators to reconcile their membership and GMP data against the records held by HMRC. Registration for this service is the first step in a process to support the ending of contracting-out in April 2016. Schemes that do not register before 5 April 2016 will not be able to use the service.

HMRC publishes Pension Schemes Newsletter 72

On 28 September 2015, HMRC published Pension Schemes Newsletter 72. Among other things, it includes:

• information on relief at source and the information required in annual returns of individual information by scheme administrators
• a note that HMRC will start to issue Pension Scheme Return (PSR) reminders, payment reminders and penalty reminders in October 2015 to administrators which have either an outstanding penalty, payment or PSR
• clarification as to what counts as member contributions, for the purpose of annual allowance reminder messages sent to those members who exceed the AA of £40,000 in the 2014/15 tax year
• information on the reduction of the LTA to £1 million from 6 April 2016 (down from £1.25 million) and on the new transitional protections. The Newsletter notes that legislation for the new fixed protection 2016 (FP16) and individual protection 2016 (IP16) will only be delivered in the Finance Bill 2016. This means that scheme members will not be able to apply for protection until after April 2016 and will not be able to notify HMRC of their intention to rely on the new protections in advance. HMRC therefore advises individuals wishing to rely on FP16 to start thinking now about what arrangements they will need to make to stop accruing benefits after 5 April 2016. HMRC hopes to be able to provide “much more detail” on the process in October 2015
• a note that HMRC cannot confirm whether an overseas pension scheme is a QROPS (see our Alert for details) and a reminder of the requirements to be met for a scheme to qualify as a QROPS
• pension flexibility reporting requirements in relation to lump sum death benefits and their taxation.

House of Commons Library publishes briefing paper on auto-enrolment since 2010

The House of Commons Library published a briefing note on 29 September 2015, looking at automatic enrolment reforms from 2010 onwards. Among other things it covers the development of automatic enrolment policy, its implementation and progress to date.

Further issues examined are those of eligibility and exclusion from the scope of auto-enrolment, and the costs of the reforms for employers.

NEST marks three year anniversary of automatic enrolment

NEST marked the three year anniversary of automatic enrolment on 1 October 2015 by noting some of the milestones achieved since its introduction in 2012.

NEST explains that the anniversary marks the halfway point for consumers, as five million workers have been automatically enrolled into pension saving to date, with a further five million still to be enrolled. It also heralds a step change in the number of employers coming under the new duties – around 64,000 employers have complied with their automatic enrolment duties in the last three years but a further 1.8 million will be required to do so between now and 2018.

The current average, over the last three years, of 58 employers enrolling each day is expected to increase to an average 2,000 a day for the next stage of auto enrolment, an increase of around 3500%.

PPI publishes Briefing Note 76 – Financial education and retirement: international examples

The PPI published a new Briefing Note on 29 September 2015, which examines international examples of financial education to illustrate approaches that could be adopted in the UK, particularly in the light of the new benefit flexibilities and the decisions that members are now faced with.