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The Finance Act 2014, which received Royal Assent on 17 July 2014, introduces measures to put in place certain changes announced in this year’s Budget.  Key points are as follows:

• The Finance Act 2014 brings certain measures, which came into effect on 27 March 2014 by House of Commons’ resolution, formally onto the statute books.  These include interim changes to capped and flexible drawdown, and increases to certain commutation and “small pot” limits
• The time limits for payment of a pension commencement lump sum (PCLS) will be removed for a limited period to allow individuals to take advantage of the Budget changes to commutation and small pot limits, as well as DC decumulation
• HMRC will be given new powers which aim to combat pension liberation schemes
• The Act also contains measures to introduce IP14.

For further details, please see our Alert.  For details of the DC decumulation changes put forward in the Budget, see “HMT” update below.

On the same day, HMRC published draft guidance on the transitional changes around pension flexibility in the Finance Bill (now Act) 2014.  The changes described in the guidance allow individuals a longer period of time in which to decide how to access their pension in the light of this year’s Budget.  However, the special rules are temporary and an individual will need to take a PCLS before 6 April 2015 and the associated pension before 6 October 2014 for the rules set out in the guidance to apply.

On 16 July 2014, the DWP published a report on the current nature and extent of pension provision among private sector organisations.

The tenth report in the series, it is the first DWP survey to be undertaken since the implementation of automatic enrolment.  The survey looks at:

The DWP intends to use the findings to inform the evaluation of the workplace pension reforms and the ongoing development of automatic enrolment policy.

The 2014 Budget proposed significant changes on the use of individuals’ DC pension pots at retirement.  HMT’s consultation “Freedom and choice in pensions”, published alongside the Budget, proposed a general overhaul of the rules relating to the options for DC benefits on retirement, with the intention of giving individuals more flexibility and choice.

The Government’s response to the consultation was published on 21 July 2014.

A Written Ministerial Statement made by the Chancellor, George Osborne, and Freedom and choice in pensions: Government decision on private sector DB to DC transfers, were both published on 20 July 2014.

In summary, the Government is pressing ahead with reforms so that, from April 2015, “everyone over the age of 55 with [DC] pension savings will be able to access them as they wish, regardless of their total pension wealth, subject to their marginal tax rate”.  As regards the guidance guarantee, the Government recognises that guidance needs to be provided by independent organisations who are free from actual or potential conflict so as to ensure impartiality.  Delivery partners will therefore include TPAS and the Money Advice Service (MAS), although consumer organisations such as Citizens Advice and Age UK are also potentially in the frame.

In order to ensure that “pension schemes are able to offer individuals flexible access to their savings”, the tax rules will be amended and a new statutory override will be introduced.  This override will be permissive, allowing schemes to follow the new tax rules, rather than their own scheme rules, if they wish to do so.

Whilst conscious that maximising freedom and choice for pensions savers may have an impact on the wider economy, the Government has decided to continue to allow DB to DC transfers, except in relation to pensions already in payment and “unfunded public service [DB] schemes”, with transfers from such schemes to DC arrangements being banned.

However, the Government will introduce two new safeguards to protect individuals (and schemes) when transferring from DB to DC:

Crucially, the Government intends to consult on whether the requirement to transfer first to a DC scheme should be removed for those DB members who wish to take advantage of the new flexibilities.

For further details, please see our Alert.

On 21 July 2014, HMT published a quick guide to the pension reforms, listing eight things people should know, including that

The Government response to the consultation on “freedom and choice in pensions” sets out a formal role for the FCA in setting the standards for the delivery partners, maintaining the standards, monitoring compliance with those standards and collecting the levy, which will fund the provision of the guidance.

On 21 July 2014, the FCA issued a consultation on:

The consultation closes on 22 September 2014.

A review commissioned by the FCA into financial advice to people who were offered enhancements to incentivise them to transfer out of their employers’ DB pension schemes (known as “ETVs”) has identified a risk of customers losing out on retirement income due to poor advice.  The review, published on 21 July 2014, also identified examples of good and poor practice.

In the coming weeks, the FCA intends to follow up its concerns with individual financial advisory firms and ask them to contact members and offer redress where appropriate.  The FCA will work with firms to ensure that affected consumers receive appropriate redress and for most consumers there is no need to act straight away.  Any consumer who has immediate concerns about the financial advice they were given should, in the first instance, contact the financial advisory firm which advised them.

ETVs may be offered by employers to incentivise members to transfer out of their DB pension schemes into a DC scheme, typically by way of an increase in the pension transfer value.  In the period covered by the review, the incentive may also have included a direct cash payment to the DB scheme member upon transfer.

Examples of unfair customer outcomes found by the review include:

On 16 July 2014, the PPF announced that it had appointed 20-20 Trustee Services Ltd to its Trustee Advisory Panel.

20-20 Trustee Services Ltd becomes the fifth advisor to join the Trustee Advisory Panel.  This is one of five panels established by the PPF which aim to provide greater certainty to members by driving pension schemes through the PPF assessment and FAS wind-up more efficiently.

20-20 have a long standing relationship with the PPF and have extensive understanding of its members and schemes.

The final report in the PPI series investigating the potential impact of auto-enrolment on private pension schemes, “How will automatic enrolment affect pension saving?”, was launched on 17 July.

The report analyses the potential effects that employee and employer responses to automatic enrolment could have on scheme membership and the total value of assets in private sector workplace pension schemes.

TPR’s automatic enrolment: commentary and analysis report 2013-14, published on 17 July 2014, shows that 99% of the UK’s largest employers met their legal duties without the need for TPR to use its statutory powers.

The report highlights the work that TPR has done in the past 12 months to support the wider pensions industry and those who run workplace pensions.  It shows the growing use of DC ‘master trusts’, open to multiple employers, and provides examples of how TPR has intervened to prevent breaches and ensure that workers receive the pension contributions they are entitled to.  Key points include:

On 15 July 2014, TPAS published its Annual report and Accounts for 2013/14.  The report provides information on its businesses, its service delivery, financial performance and governance.

In this appeal against a PO decision, the High Court found that:

The High Court concluded that, despite the transfer of her employment to a private contractor, Ms Ellis remained entitled to retire at age 55 without a reduction being applied to her pension.

Please click here for a full summary of the case.