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

• Annual reports
• EIOPA publishes additional stress test documentation
• Greece update
• FCA issues Pension Wise policy statement
• The impact of the new pension flexibilities – FCA Update
• FCA request for information
• HMRC publishes updated technical specifications
• HMRC: updated list of recognised overseas pension schemes published
• House of Commons Library publishes briefing paper on restricting pensions tax relief
• New NEST CEO appointed
• TPR issues statement on evidence gathering in relation to flexibilities
• TPR confirms consultation with FCA on extending “specific risk warnings” to trust-based DC schemes
• Pensions liberation: awareness month
• And finally…

Annual reports

Both the PO and TPR have issued their annual reports over the last week.

TPR’s reports that:

• 2 new codes of practice – for DB and Public service pension schemes – were consulted on and subsequently published in response to earlier significant legislative changes
• More than 33,000 employers across one three month period submitted their online declaration of auto-enrolment compliance on time – three times more than all large employers in the UK
• Around 787,000 letters raising awareness of automatic enrolment were dispatched in 2014-2015
• TPR received over 175,000 inbound contacts from scheme members, trustees, employers and advisers about a range of issues
• Settlements of over £200 million were made through casework following its engagement
• TPR produced its first radio ad, its first in-house media ad campaign and launched its own YouTube channel

The PO’s report (the first by Anthony Arter, the new incumbent) stated that:

• The PO took on 1,281 new investigations – 21% more than 2013/14 and 22% more than planned
• 207 of those new investigations arose from two groups of cases that the PO believes are unlikely to form part of a long-term trend (177 were about “pension liberation” and 30 about a particular scheme)
• Investigations ended in the year took 9.8 months on average to complete
• The most common topics of completed complaints were missing, late or incorrect benefits, followed by misquotations/misinformation, then transfers and ill-health retirement
• 38% of complaints were upheld, at least in part

Other pensions-related organisations which have also issued their annual reports at the start of July include the FCA and TPAS.

EIOPA publishes additional stress test documentation

Following the launch of its occupational pensions stress test and quantitative assessment on solvency, on 17 June 2015 EIOPA published its fourth set of questions and answers for the occupational pensions stress test and quantitative assessment.​​

For further detail on the stress test and quantitative assessment, please see our 7 Days dated 18 May 2015.

Greece update

Following the referendum on 5 July 2015 in Greece, banks remain closed.

UK Chancellor George Osborne, in a speech on the situation in Greece, confirmed on 29 June 2015 that UK Government payments, including state pension and public service pension payments, will continue to be made into Greek bank accounts. The DWP has been asked to contact British residents receiving payments and assist them in switching their payments to a non-Greek bank account if they so wish. We will continue to monitor updates.

FCA issues Pension Wise policy statement

The FCA issued a policy statement on 3 July 2015 in relation to Pension Wise.

The organisations appointed as designated guidance providers for Pension Wise are not regulated as authorised firms by the FCA for the delivery of the guidance service. However, the Government has placed a duty on the FCA to set standards and to monitor the designated guidance providers’ performance against these standards. It has also afforded the FCA powers to require information for these purposes and, where designated guidance providers are in breach of its standards, to make recommendations to the designated guidance providers and the Treasury as necessary.

The FCA consulted on a policy for making recommendations to the Pension Wise providers (CP15/12 Pension Wise – recommendation policy). The latest Policy Statement summarises the feedback received and publishes the final policy.

The impact of the new pension flexibilities – FCA Update

The FCA published an update on the impact of the new pension flexibilities on 1 July 2015.

The FCA issued its Retirement Income Market Study in March 2015, which provided a snapshot of areas where the market was, and was not, working well for consumers, and concluded with recommendations aimed at improving consumer engagement with retirement decisions.

The update provides the response to the Study, including information on the testing of new ‘Wake Up’ packs, and notes that the FCA will carry out a follow-up to the Study in early 2016.

The update also provides information on how the FCA has been monitoring market developments to see how firms have responded to the challenges presented by the reforms, and how the protections put in place, such as signposting to Pension Wise, are working in practice. It notes the FCA’s new role in monitoring compliance of Pension Wise with its standards, and reports back on its ‘Scamsmart’ campaign.

It also looks into how the market is coping with the increased activity stemming from the new freedoms.

As announced earlier in the year, the FCA is currently reviewing its pension rules (including a review of retirement risk warnings and incorporating elements of the ABI’s code of conduct on retirement choices into its rules), and will be consulting later in the year where it considers further changes are necessary.

Finally, the FCA notes that it is analysing developments in the decumulation market, including but not limited to, the types of products developed and charges faced by consumers taking advantage of the new flexibilities. It intends to return to firms later in the year requesting further information about the development of this market.

FCA request for information

In connection with the pension flexibilities update, on 1 July 2015 the FCA issued a “Dear CEO” letter  from the FCA Director of Supervision, aimed at pension and retirement income providers, requesting information relating to:

• options offered by pension providers to consumers seeking to access their pension savings
• advice requirements for consumers seeking to transfer out of pensions or into decumulation products
• treatment of insistent clients
• transfer procedures, and
• exit charges

The information is required to assist the FCA’s ongoing supervisory and policy work relating to pension flexibilities and to provide additional input into HM Treasury’s planned consultation on pension transfers and barriers faced by customers. Firms are requested to provide a full response to this request by 7 August 2015.

HMRC publishes updated technical specifications

On 30 June 2015, HMRC published further updates to its scheme returns, 2015 to 2016 event reports and accounting for tax pages.

HMRC: updated list of recognised overseas pension schemes published

After a temporary suspension, from 17 June 2015 (see our 7 Days publication of 22 June 2015), HMRC has published the reformatted Recognised Overseas Pension Schemes (ROPS) list on 1 July 2015. The list has been heavily edited, removing more than three-quarters of offshore pension schemes. Australia saw the biggest drop in recognised schemes, with 1,599 of 1,600 schemes delisted.

HMRC emphasises in its notes that the list contains pension schemes that have told HMRC that they meet the conditions to be a ROPS and have asked to be included on the list, but that HMRC cannot guarantee that any of these schemes are ROPS, or that any transfers to them will be free of UK tax. It warns that it is the responsibility of schemes and members to find out if they have to pay tax on any transfer of pension savings.

HMRC also note that it ‘will usually’ pursue any UK tax charges (and interest for late payment) arising from transfers to overseas entities that do not meet the ROPS requirements even when they appear on this list. HMRC will also charge penalties in appropriate cases.

House of Commons Library publishes briefing paper on restricting pension tax relief

The House of Commons Library published a briefing paper on 1 July 2015, looking at the development of the restriction of annual and lifetime allowances (from Budget 2009 to date) and the Government’s proposals for further pensions tax reform.

New NEST CEO appointed

NEST announced on 3 July 2015 that Helen Dean, currently NEST’s executive director, product and marketing, has been appointed as NEST’s new chief executive. She will take on the role in the autumn.

TPR issues statement on evidence gathering in relation to flexibilities

On 1 July 2015, TPR announced that it had started work on a survey on exit fees and charges and the transfer process in occupational DC pension schemes. The FCA is undertaking a similar request for data from pension providers.

The survey is designed to inform the Government’s forthcoming consultation on options to address excessive early exit penalties and to improve the transfer process, and is expected to be published later in the summer.

Wider discussions with multi-employer and large single employer schemes will examine the operational readiness, governance and member communications of these schemes.

TPR notes that it expects to conduct further research on decumulation, to include costs and charges, in the autumn, and that it will consider with the Government and the FCA what further action may be required to promote good outcomes for members.

TPR confirms consultation with FCA on extending “specific risk warnings” to trust-based DC schemes

Speaking at the Pensions and Benefits UK 2015 conference, Mark Boyle, chairman of TPR, confirmed that it is consulting with the DWP and the FCA on whether large trust-based DC schemes and master trusts should be required to provide “specific risk warnings” to members who wish to use the DC benefit flexibilities (currently only a requirement for contract-based DC arrangements). We await further detail.

Pensions liberation: awareness month

July is National Scams Awareness Month – a joint initiative run by Citizens Advice and Trading Standards. TPAS and TPR are supporting the initiative, and TPR will be promoting the next phase of its ‘scorpion’ campaign later in the month.

And finally…

Rumours abound as to what we can expect from the Budget this week (Wednesday 8 July), including in relation to cuts in the higher rate tax thresholds and lifetime allowances, and potentially even changes in relation to salary sacrifice.

The first Finance Bill of the new Parliament will be published on 15 July 2015.

We will be issuing Alerts on both in due course.