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:

• Government requires providers to disclose all hidden pension charges
• Personal pensions: retirement annuity contracts and free standing AVCs
• Personal pensions (including stakeholder pensions) for individuals: scheme members’ annual contributions
• Registered pension schemes: cost of tax relief
• HMRC updates guidance notes
• Pensions Infrastructure Platform announces PIP PPP equity fund
• TPAS issues reminder on FP14
• Innospec v Walker (Employment Appeal Tribunal)
• HMRC v Forde and McHugh Limited (Supreme Court)

Government requires providers to disclose all hidden pension charges

On 24 February 2014, the DWP announced that the government had tabled an amendment to the Pensions Bill to require pension providers to disclose all transaction costs in DC workplace pensions.  (See Steve Webb’s ministerial statement).

This extra information is intended to enable those running DC schemes to see exactly how much they are paying for asset management services.  This will allow them to get the best value for scheme members, who will also benefit from greater transparency.

The government also announced that it will publish its response to the consultation on charges, along with proposals on quality and transparency in workplace pension schemes soon.  This will contain further details about the implementation and timing of the above measures on charges.

Personal pensions: retirement annuity contracts and free standing AVCs

On 28 February 2014, HMRC published statistics relating to personal pension contributions, both stakeholder and non-stakeholder, for the years 1990 to 2012.

Personal pensions (including stakeholder pensions) for individuals: scheme members’ annual contributions

On 28 February 2014, HMRC published statistics showing the contributions made to personal pensions, by type of scheme, as reported to HMRC by providers for the year.

Registered pension schemes: cost of tax relief

On 28 February 2014, HMRC published a table showing the cost of tax relief in the public and private sectors, as well as individual’s personal pension plans.

HMRC updates guidance notes

The Foreign Account Tax Compliance provisions (commonly known as FATCA) aim to combat tax evasion by US persons with non-US accounts.

FATCA requires financial institutions outside the US to report information on US account holders to the US Internal Revenue Service (IRS).  If financial institutions fail to report the required information, 30% US tax would be withheld on all US payments to them.
On 12 September 2012, the UK and the US signed a Treaty to implement FATCA in the UK.  Under the terms of this agreement, UK financial institutions will provide HMRC with the required information.  HMRC will then forward that information to the IRS.

On 28 February 2014, HMRC issued updated guidance notes on the implementation of the International Tax Compliance (USA) Regulations 2013(the UK legislation which brings into effect the implementation of the Treaty).

Paragraph 2.11 confirms that any pension scheme or other retirement arrangement established in the UK will have no reporting obligations and Reporting UK Financial Institutions will not be required to review or report on accounts held by such pension schemes or other retirement arrangements.

Pensions Infrastructure Platform announces PIP PPP equity fund

On 26 February 2014, the NAPF announced details of the Pensions Infrastructure Platform’s (PIP) first fund. The PPP Equity PIP Limited Partnership has been established by Dalmore Capital Ltd who will act as manager of the fund.

The fund has a hard cap of £500m, of which £260m has been committed. Further fund-raising from other pension schemes will now commence.  Additional funds will form part of the PIP in due course.

TPAS issues reminder on FP14

On 25 February 2014, TPAS warned individuals not to miss the deadline for applying for FP14.

From the tax year 2014/15, the LTA will reduce to £1.25 million from its current level of £1.5 million.  To help those most affected by the reduction in the LTA, transitional protections will be available in the form of FP14 and IP14.  (For further information on IP14, please see our Alert).

FP14 allows an individual to maintain an LTA of the greater of £1.5 million and the standard LTA.  As with FP12, FP14 will be lost:

• in a DC arrangement, if contributions are paid to the scheme by the member or someone else on their behalf, or employer contributions are paid;

• in a DB arrangement, if the pension and lump sum rights of a member increase by more than the relevant percentage5 at any time during a tax year. The test for benefit accrual can occur at any time up to the point when benefits are actually taken;

• if a new arrangement is established in respect of the individual; and

• on a transfer, subject to certain limited exceptions.

The window for applying for FP14 closes on 5 April 2014.

If you would like further information on FP14 or IP14, please speak to your usual Sackers’ contact.

Innospec v Walker (Employment Appeal Tribunal)

The EAT concluded that the Employment Tribunal was wrong to determine that a provision in the Equality Act 2010, which allows pension schemes to restrict the survivors’ benefits provided to civil partners was incompatible with.

Click here for a full summary.

HMRC v Forde and McHugh Limited (Supreme Court)

This appeal was the lead case in a number of appeals concerned with liability to pay NICs.

In 2002 Forde and McHugh Limited (FML) set up an unapproved retirement benefit scheme to provide certain benefits to its employees and directors.
Mr McHugh, a shareholder and director of FML, applied to become a member.  FML made an initial cash contribution to the scheme of £1,000 and transferred to it Treasury Stock with the nominal value of £162,000, both for Mr McHugh’s benefit.

The question was whether the transfers were payments of earnings to or for the benefit of Mr McHugh for the purposes of the Social Security Contributions and Benefits Act 1992.

HMRC decided that they were and that FML was therefore liable to pay Class 1 NICs on the value of the transfer.  FML’s appeal to the Upper Tribunal was successful but the Court of Appeal reinstated HMRC’s decision.

The Supreme Court unanimously allowed the appeal concluding that the transfer to the trust was not the payment of “earnings” for the purposes of the Act.  This meant that FML was not liable to pay NICs on the value of the transfer to the unapproved retirement benefit scheme.