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

• Automatic enrolment thresholds for 2016/17
• The draft Occupational Pension Schemes (Scheme Administration) (Amendment) Regulations 2016
• PPF Levy Ceiling and Compensation Cap Order 2016 published
• Public Service Pensions: revaluation and indexation
• Bank of England and Financial Services Bill: second reading in House of Commons
• DWP publishes guidance on State Pension sharing
• EIOPA consults on EU single market for personal pension products
• EU Commission and United States agree new data-flow framework
• HMRC issues latest “Countdown bulletin” on the abolition of DB contracting-out
• HM Treasury consults on reforms to public sector exit payments
• HM Treasury publishes Pension Wise data
• House of Commons Library briefing papers published
• PPF publishes updated Funding Determination statement
• Security of Assets Working Party guide: How safe are your DC assets?

Automatic enrolment thresholds for 2016/17

The draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2016 has been published, setting the “upper earnings limit” at £43,000 (up from £42,385 in 2015/16). It is due to come into force on 6 April 2016.

This follows on from the DWP’s review and analysis of the earnings trigger and qualifying earnings band. Following its review, the DWP chose to maintain the earnings trigger at £10,000 and the lower limit of the qualifying earnings band at £5,824.

The automatic enrolment earnings trigger determines who gets automatically enrolled into a workplace pension, while minimum contributions for automatic enrolment are based on earnings within the qualifying earnings band. The Government reviews both the earnings trigger and qualifying earnings band every year and revises them if appropriate.

The draft Occupational Pension Schemes (Scheme Administration) (Amendment) Regulations 2016

On 1 February 2016, the DWP published its response to chapter 3 of its “Better Workplace Pensions” consultation on minor regulation changes to the governance provisions.

Chapter 3 sought views on the draft Occupational Pension Schemes (Charges and Governance) Regulations 2016, which contained some minor changes aimed at ensuring that the pension scheme governance provisions work as intended.

As a result, the final draft Occupational Pension Schemes (Scheme Administration) (Amendment) Regulations 2016 were laid before Parliament for approval on 1 February 2016 and are due to come into force on 6 April 2016.

The Government’s response to other aspects of the consultation is expected to follow in due course.

PPF Levy Ceiling and Compensation Cap Order 2016 published

The Board of the PPF charges a levy on DB occupational pension schemes (and the DB element of hybrid schemes) to fund the compensation it will pay to schemes’ members if their employer becomes insolvent and the scheme is underfunded below a certain level. The level of compensation payable to members who are below their scheme’s normal pension age is normally limited to a maximum of 90% of the compensation cap.

The Secretary of State is required to set a levy ceiling preventing the Board from raising the levy above a set maximum and uprate this annually in line with the general level of earnings in Great Britain. The Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling and Compensation Cap) Order 2016, which was laid on 3 February 2016, sets the levy ceiling at £981,724,264 (up from £947,610,293) for the PPF’s financial year beginning 1 April 2016.

The Order also specifies the amount of the PPF compensation cap as £37,420.42 (up from £36,401.19).

Public Service Pensions: revaluation and indexation

The Public Service Pensions Revaluation (Earnings) Order 2016 was laid on 1 February 2016 and will come into force 1 April 2016.

The Earnings Order specifies the annual percentage change in the earnings to be applied for the purposes of revaluation required by schemes under the Public Service Pensions Act 2013 (the 2013 Act) in relation to the period 1 April 2015 to 31 March 2016. This is specified as an increase of 2%.

Also on 1 February 2016, a draft of The Public Service Pensions Revaluation (Prices) Order 2016 was published. The Prices Order specifies the annual percentage change in prices to be applied for the purposes of revaluation required by schemes under the 2013 Act over the same period (1 April 2015 to 31 March 2016). The draft Order specifies a decrease in prices of 0.1%. This Order is also due to come into force on 1 April 2016.

A Commons Written Ministerial Statement was issued on the subject on 2 February 2016.

Bank of England and Financial Services Bill: second reading in House of Commons

The Bank of England and Financial Services Bill 2015-16 had its second reading in the House of Commons on 1 February 2016.

During the debate, the Government confirmed that it would introduce a duty on the FCA to force it to cap excessive early exit charges; this would be done as an amendment during Committee stage. This follows the Chancellor’s January 2016 statement that the Government will legislate to cap such early exit charges for individuals eligible to access the retirement freedoms that came into effect on 6 April 2015 (see 7 Days dated 25 January 2016).

DWP publishes guidance on State Pension sharing

On 4 February 2016, the DWP published guidance on the sharing of State Pension entitlements on the termination of a marriage or civil partnership (including overseas proceedings).

This information is aimed at legal and financial advisers, and courts that make sharing orders, and is intended to help explain how the new arrangements for State Pension sharing will affect people who reach State Pension age on and from 6 April 2016.

EIOPA consults on EU single market for personal pension products

EIOPA published a consultation paper on 1 February 2016, relating to the development of an EU single market for personal pension products. The consultation paper contains EIOPA’s final advice on the attractiveness and feasibility of a Pan-European Personal Pension Product (PEPP), taking account of stakeholders’ feedback received through the public consultation conducted in 2015.

EIOPA confirms its position on the potential for and the design of a PEPP, setting out standardised features that such a product should have, as well as flexible features such as the decumulation options available at retirement and guarantees to be offered.

The consultation will run until 26 April 2016.

EU Commission and United States agree new data-flow framework

On 2 February 2016, the European Commission announced that it had reached agreement with the US on a new framework for transatlantic data flows. This will be referred to as the “EU-US Privacy Shield” and will replace the Safe Harbor framework which was invalidated by the CJEU last October, following the ruling in the case of Schrems.

The new EU-US Privacy Shield will include the following elements:

• strong obligations on companies handling Europeans’ personal data and robust enforcement
• clear safeguards and transparency obligations on US government access
• effective protection of European citizens’ rights with several redress options, including the establishment of a new ombudsman.

The College of Commissioners has instructed Vice-President Ansip and Commissioner Jourová to prepare a draft “adequacy decision” in the coming weeks, which could then be adopted in due course after consultation. In the meantime, the US will make the necessary preparations to put in place the new framework, monitoring mechanisms and new ombudsman.

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

On 2 February 2016, HMRC published issue 13 of its contracting out Countdown Bulletin, which provides further guidance for pension scheme administrators ahead of the end of contracting-out on 5 April 2016.

Amongst other things, this bulletin provides Pension Forum feedback, a Scheme Reconciliation Service reminder, survey results and updates from the DWP.

HM Treasury consults on reforms to public sector exit payments

In the Autumn Statement 2015 and Spending Review, the Government announced that it intended to consult on further “cross-public sector action” on exit payment terms (following their earlier consultation on public sector exit charges).

On 5 February 2016, HMT published this further consultation on proposed reforms to public sector exit payments, with the aim of making compensation terms “fairer and more consistent”. This includes proposals for the introduction of changes to reduce the cost of employer funded pension top ups for early retirement as part of redundancy packages, and tapering of the amount of lump sum compensation an individual is entitled to receive as they get closer to their retirement age. The reforms build on the new rules which were set out in the Small Business, Enterprise and Employment Act 2015.

The consultation closes on 3 May 2016.

HM Treasury publishes Pension Wise data

HMT published information on its “pensions dashboard” on 1 February 2016 in relation to the performance of Pension Wise up to the end of December 2015.

The figures show that the “cost per transaction” (ie per individual’s appointment) is now £516, up 4% from November 2015, and that the number of face-to-face appointments made dropped steeply between October and December 2015.

House of Commons Library briefing papers published

The House of Commons Library published a briefing paper on Frozen Overseas Pensions on 3 February 2016, examining why the UK State Pension is not uprated in some overseas countries, the debates in relation to this policy, and the recent legal challenge to it.

On the same date, the Library also updated its briefing paper on State Pension uprating, looking at the current policy on uprating the State Pension and Pension Credit.

PPF publishes updated Funding Determination statement

On 8 February 2016, the PPF published version F2 of the statement which sets out the detail of how the Board of the PPF will make a Funding Determination, and provides information for actuaries undertaking estimates for the purpose of informing the PPF’s determinations.

This version of the Statement is effective for the making of Funding Determinations on or after 8 February 2016.

Security of Assets Working Party guide: How safe are your DC assets?

The Security of Assets Working Party has launched a guide for trustees entitled “How safe are your DC assets?”. The report aims to help trustees explore the levels of protection in place for DC assets, to improve levels of understanding of the protections members have, and to highlight key areas to explore when seeking to change platform provider or fund managers.

Barry Parr, Chair of the Security of DC Assets Working Party and Co-Chair of the Association of Member Nominated Trustees, noted that TPR’s DC Code of Practice 13, including the recent draft of the new Code, requires trustees to understand such issues, and to be able to share their assessment of asset security with employers and members.