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:

• Budget 2014
• Steve Webb MP gives statement on pensions strategy
• The Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2014
• Guide to the regulation of workplace DC pensions
• FCA publishes review into delivering ‘independent’ financial advice following the implementation of the Retail Distribution Review
• New information powers for dealing with pension scheme registration
• PPF confirms plans to use new PPF-specific insolvency model
• PPF: Levy data deadlines approaching
• New Chair of TPR appointed
• TPR urges advisers to step up and get ready for automatic enrolment

Budget 2014

Having been expected to give pensions a wide berth, George Osborne’s fourth Budget as Chancellor (delivered on 19 March 2014) heralded some significant changes for DC schemes aimed at generating flexibility for members when they come to retire.

Key points were as follows:

• From April 2015, radical changes to the rules on the use of members’ DC pots at retirement are being proposed, with the twin aims of simplifying the pensions tax regime and giving individuals more choice and flexibility.
• The Government is also considering to what extent it should extend these proposals to DB members.
• With the aim of providing greater flexibility for DC members now, certain changes are being introduced with effect from 27 March 2014.
• HMRC is to be given greater powers to help prevent pension liberation schemes being registered.
• No additional changes to the AA or standard LTA have been announced, despite pressure from the Liberal Democrats for further reductions.

For further details please see our Alert.

On 20 March 2014, HMRC published guidance on the changes to the limits affecting benefits that can be taken from registered pension schemes which were announced in the Budget.  As announced in the Budget, these take effect from 27 March 2014.

Steve Webb MP gives statement on pensions strategy

Following the changes announced in this year’s Budget, on 20 March 2014 Steve Webb MP, the Minister for Pensions gave a statement to Parliament setting out the government’s strategy for future pension provision.  In brief, he noted:

• the forthcoming introduction of the single-tier state pension
• automatic enrolment
• measures to ensure workplace schemes are value for money and well-governed – proposals are due to be published next week
• the creation of  a new “defined ambition” framework for workplace pensions, enabling new forms of risk sharing between employers and employees
• the flexibility that will be introduced at retirement for members of DC schemes
• the relaxation of the rules on trivial commutation and existing drawdown products with effect from 27 March 2014.

The Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2014

These regulations, which come into force on 1 April 2014, make changes to some of the practical arrangements associated with automatic enrolment.

Currently a pension scheme which provides for benefits based on average salary, such as a CARE scheme, is excluded from being a qualifying scheme if the scheme does not revalue the benefits of members whilst in pensionable service by a minimum rate.  These regulations give schemes greater flexibility in the ways in which they can provide for this minimum level of revaluation.

An employer which provides a hybrid scheme and which certifies the money purchase benefits in the scheme against one of the alternative sets of requirements is currently unable to phase in employer and total contributions in respect of those money purchase benefits.  These regulations make changes to ensure that an employer providing such a scheme is put on a level footing with one providing a “pure” money purchase scheme.

Guide to the regulation of workplace DC pensions

On 21 March 2014, the FCA published a guide to the regulation of workplace DC pensions.  The guide, which was developed jointly with TPR, aims to:

• clarify the regulatory focus and approach of each regulator, how they interact and how they manage any overlaps in regulatory structure and shared risks
• demonstrate the common elements in our approaches
• address potential concerns that the differences in how trust-based and contract-based DC pension schemes are regulated could adversely affect member outcomes.

It is particularly aimed at market participants such as trustees, advisers and pension providers.

FCA publishes review into delivering ‘independent’ financial advice following the implementation of the Retail Distribution Review

The Retail Distribution Review (RDR) came into force in 2013 with the aim of improving outcomes for consumers by enhancing standards of professionalism, removing key biases, and ensuring the cost of advice is clear.

One of the central elements of the RDR was that financial advisers operate as either “restricted”, where they are only able to recommend certain products and providers; or “independent”, for which they have to objectively consider all types of retail investment products to meet the investment needs of a retail client.

On 20 March, 2014, the FCA published a thematic review which shows that most advisory firms describing their service as ‘independent’ appeared to use the description accurately.

New information powers for dealing with pension scheme registration

As part of HMRC’s continuing strategy to combat pension liberation, changes were announced in the 2014 Budget providing HMRC with new powers on pensions liberation with effect from 20 March 2014.

From 20 March 2014, HMRC can send information notices to ask for documents and other information from the pension scheme administrator and other persons to help HMRC decide whether or not to register a pension scheme.

There are new penalties and appeals in respect of the application for registration and information notices.  These include a new penalty if false information is provided in connection with an application for registration.

There is also a new requirement that the pension scheme must be set up and maintained for the main purpose of providing authorised pension benefits.  Where HMRC believe this is not the case, registration may be refused, or an existing pension scheme may be de-registered.

HMRC will use these new powers for all applications for registration received on or after 20 March 2014.  This means pension scheme administrators and other persons may be subject to an information notice under the new powers regardless of whether information has previously been provided in connection with a pension scheme registration.

PPF confirms plans to use new PPF-specific insolvency model

On 20 March 2014, the PPF confirmed that it plans to use a model for measuring insolvency risk which is tailored to its universe of sponsoring employers and the specific risks they pose to the PPF.

The model has been developed following months of work with Experian which was chosen as the PPF’s new insolvency risk score provider in July 2013.

However, further fine-tuning is needed to make sure that new insolvency scores can be integrated successfully into the pension protection levy framework.  As this will take a little more time, the PPF intends to publish a consultation at the end of May 2014.  This consultation will set out details about how the proposed new model will work, how the existing ratings will change and how levies may be affected accordingly.  This consultation will also set out the PPF’s plans for the next three levy years from 2015/16 to 2017/18.

We will publish an alert on this announcement shortly.

PPF: Levy data deadlines approaching

The PPF’s 2014/5 data deadlines are fast approaching.

So that your scheme’s levy is calculated on the basis of the most accurate and up to date information, please ensure data is provided to the PPF by the deadlines below.

The following key dates apply for the 2014/15 levy year:

• D&B employer failure scores are calculated as at the last working day of each month between 30 April 2013 and 31 March 2014
• 5pm on 31 March 2014 is the deadline for updating Exchange with levy-related information for the 2014/15 levy (except where set out below).  This information will be used to calculate individual levy bills
• 5pm on 31 March 2014 for certification / re-certification of contingent assets
• 5pm on 30 April 2014 for deficit-reduction contributions
• 5pm on 30 June 2014 for certification of full block transfers that have taken place up to and including 31 March 2014.

If you need advice on any of the above please speak to your usual Sackers’ contact.

New Chair of TPR appointed

On 18 March 2014, the DWP announced that Mark Boyle has been appointed as Chair of TPR.  He will take up his post from 1 April 2014 for a four-year term.

TPR urges advisers to step up and get ready for automatic enrolment

On 18 March 2014 TPR called on advisers to ensure they are ready to help the tens of thousands of small and micro employers who are due to automatically enrol their workers in 12 to 18 months time.

Research released by TPR supports findings last autumn showing that while advisers are on the right track, there is no room for complacency.

The report on intermediary awareness, understanding and activity relating to automatic enrolment shows:

• The vast majority of intermediaries are aware of automatic enrolment.
• Most intermediaries understand the automatic enrolment duties and have higher levels of detailed knowledge than in spring 2013.  A significant number of payroll administrators and accountants are more aware and knowledgeable than a year ago, although some gaps in knowledge still remain.
• While most IFAs, accountants and payroll administrators are planning to, or are already helping their clients, bookkeepers and HR professionals are less involved.
• Awareness of TPR is high amongst adviser groups although again, bookkeepers and HR professionals are less aware.
• Almost all accountants plan to be involved with automatic enrolment and also think their clients will rely on them for help and advice, a third however only expect to make their clients aware.

Other key findings in the report, which is published by TPR in spring and autumn each year, are:

• While the least well known aspect of automatic enrolment continued to be the need for employers to register with TPR, awareness among payroll administrators rose from 51% to 67%.  Awareness among accountants rose from 23% to 38%.
• Significantly more payroll administrators knew they could look up their clients staging date on the regulator’s website – rising to 66% compared to 47% in spring 2013.
• The majority of IFAs (79%) consulted TPR’s website and the majority (97%) thought it was useful.