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The DWP has published final Regulations following the October 2013consultation paper on reclassifying DC benefits after the Bridge Trustees case. Bridge Trustees case. The Supreme Court’s July 2011 decision in the Bridge Trustees concluded that it was possible for certain benefits to be within the definition of “money purchase benefits” despite there being a potential mismatch between assets and liabilities. The DWP immediately announced that it would legislate to reverse this decision – with retrospective effect.

The main change from the consultation is a limit to the retrospective extent of the Regulations. The Explanatory Memorandum, published with the regulations, states that:

“The majority of stakeholders (68 [of 95 total] written responses) were of the view that where schemes had not acted consistently with the Department’s understanding of money purchase benefits, they could incur some costs if required to revisit decisions made after 27 July 2011. This was the date of the Department’s statement of intention to clarify the definition of money purchase benefits. These Regulations take account of this and now validate actions and decisions taken after 27 July 2011 and the coming into force date in all areas.”

This means that, in general, trustees will not need to revisit decision in relation winding up and employer debt as indicated in the consultation. However, schemes will still need to be ready to start paying PPF levies from 2015/16 and complete scheme funding valuations within the allotted timeframe. This means:

It is intended that the Regulations will come into force in “early July” – later than expected at the time of the consultation “due to the complexity and range of the issues raised.”

An Alert will follow shortly.

Thousands of people in jobs where it is not traditional to save in a pension including sales assistants, technicians and dinner ladies are building up retirement savings for the first time, according to new data from the ONS.

The pension tables within the Annual Survey of Hours and Earnings show there are nearly 1 million additional savers in DC workplace pension schemes since 2011. There are rises across all occupational groups, with some of the biggest increases in sectors with low numbers of staff in schemes.

According to research by the NAPF, over a quarter (28%) of consumers are now more likely to start saving or save more into a pension following the reforms announced in the Budget.  Only 3% said they were less likely to save into a pension or stop saving completely.

The NAPF’s Spring Workplace Pensions Survey 2014 found people age 18-24 to be the most likely group to save into a pension in the wake of the Budget.  Lower income respondents (people with a combined household income of less than £14,000 a year) also said they felt more attracted to pension saving (42%), which could imply that they have been incentivised by the option of having more flexible access to their pension savings.

The proposed reforms introduce greater flexibility around how people can access their pension savings at retirement and 61% of survey respondents said they feel capable of deciding what to do with their pension savings.  People were generally fairly cautious about how they plan to utilise their pension pots, with 58% preferring to receive a regular income for life rather than risk their money running out.  24% per cent agreed they expect they will take all of their pension savings in cash because they have other sources of income and just under half (47%) were worried their pension would run out and they would need to rely on the state.

But, when asked, 19% agreed they would take the lump sum irrespective of whether they had other savings elsewhere, which suggests the number of pensioners choosing this route could be significantly higher than the Government anticipates, with subsequent ramifications on retirement income and state pension-reliance.

Shortly after the Budget the NAPF ran a separate member poll asking pension schemes specifically about the proposed “guidance guarantee” service.  More than three quarters (78%) of NAPF DC fund members said they did not understand what the Government expects them to deliver.  57% of members also said they will struggle to deliver the “guidance guarantee” ahead of the April 2015 deadline.

For details of the Budget changes please see our Alerts: Budget 2014: Never a quiet year for pensions and Budget changes for pensions: What’s happening on 27 March 2014?

On 29 April 2014, the PPF launched its plan for the next three years.

In its Strategic Plan for 2014/17, the PPF outlines its vision for 2017 and confirms it remains on course toward its 2030 funding target.  Throughout the coming year it will be reviewing its models for investment, risk and finance operations to ensure they remain best in class and appropriate for its growing size and scale.  The PPF will also continue to work towards bringing its member services in-house.

On 1 May 2014, TPR published a voluntary assurance framework which is intended to enable trustees of master trusts to demonstrate to employers that their scheme is managed to a high standard.

The framework was developed by ICAEW in association with TPR.  It sets out how trustees should report against a series of ‘control objectives’ related to governance and administration, which are aligned with TPR’s DC quality features, and which procedures practitioners must undertake.

TPR intends to establish and maintain a publicly available list of master trusts that have obtained independent assurance.  Employers and advisers will be able to refer to this list when selecting an auto-enrolment scheme.

Andrew Warwick-Thompson, TPR’s executive director for DC, governance and administration, said:

“We expect well-run master trusts to play a central role in helping people retire with an adequate income in the future.

It is important that schemes operating in this market place are scalable, durable, well-governed and embrace high standards of practice. Assurance acts as a check against schemes being set up by people who lack the competence or financial resources to take care of people’s pension savings adequately.

Whilst voluntary, we expect master trusts to obtain this independent assurance and we strongly support those providers who have already informed us of their intention to adopt this important accreditation.”

For further details, please see our Alert.

On 2 May 2014 the NAPF announced that it has reinforced the requirements for default investment strategies in its Pensions Quality Mark (PQM) (a standard recognising high quality DC pension schemes).

The new investment standard, which is part of the governance section of the PQM principles, outlines the good practice processes pension schemes must follow when setting, monitoring and reviewing the default fund’s investment objectives.

The revised standards also require documented objectives of the default investment strategy, plus regular monitoring and formal review by trustees, governance committee or through the company’s own annual scheme review, every three years or more.

DC schemes looking to gain the independently assessed PQM will need to demonstrate that they meet the strict criteria for contributions, governance and communications, including the new enhanced governance principles.

Schemes that have already been awarded the PQM will have until their first renewal after April 2016 to meet the new default investment strategy standard.

The PPI has published a series of briefings which aim to provide a detailed, comprehensive and independent analysis of the impact of introducing the single-tier state pension.

This final briefing in the series considers the long-term cost and spending implications of the single-tier reforms and a range of alternative assumptions about the setting of the level, uprating, and State Pension Age changes.

The briefing note finds that, while the new single-tier system is expected to be broadly cost neutral in the early years of implementation, there is significant scope for future governments to change the path of future spending, for example by restoring the earnings linking of the state pension or through further increases to the State Pension Age.

In this case some 30 documents relating to the Gleeds pension scheme were found to be invalid as they had not been executed in accordance with statutory requirements.  As a result the scheme’s deficit on an ongoing basis could be increased by approximately £45 million.

Click here for a full summary of the case.