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:

• Pension Schemes Bill – Committee stage
• DWP publishes figures which show which sectors and industries have largest growth in pension saving
• Consultation on Disclosure Regulations published
• New Actuarial Profession Standard introduced
• FCA publishes paper proposing a new charge cap in workplace personal pension schemes
• HM Treasury publishes Taxation of Pensions Bill briefing note
• Pension Ombudsman revamp
• TPR reports on Kodak and UK Coal
• The Purple Book
• TPR issues additional reminder that all employers need to act as automatic enrolment enforcement activity increases

Pension Schemes Bill – Committee stage

On 28 October 2014, the public bill committee considering the Pension Schemes Bill 2014-15 began their by-line examination of the Bill.

Pensions minister Steve Webb gave a detailed explanation of the new statutory definitions of ‘defined benefit’, ‘defined contribution’ and ‘shared-risk schemes, as well as commenting on the new concept of collective benefits.  The minister also referred to the DWP’s thinking in enacting the concept of the “pensions promise”.  It was suggested that the word “promise” should be interpreted in line with its ordinary meaning and drew a contrast with a “guarantee”.  The minister said that the DWP’s intention is that most existing final salary and career-average schemes will be covered by the new definition of a DB scheme.  A closed final salary scheme that contains a money purchase section for new members will not be treated as a shared-risk scheme, since the new definition of a shared-risk scheme requires a pension promise to be offered to all members, not merely those in a particular section of a scheme.  These definitions are crucial to the operation of pension schemes as many of the protective provisions in pensions legislation are predicated on establishing the nature of a benefit – an issue which has been highlighted in recent years following the reclassification of benefits following Bridge Trustees.

We will be tracking the process of the Bill closely.

DWP publishes figures which show which sectors and industries have largest growth in pension saving

New figures released by the DWP on 3 November 2014 show the private sector industries and occupations which have seen the most significant growth in pension saving since 2012.

Sales and customer service has seen a leap in participation of 15 percentage points, from 27% to 42%, while those working in distribution, hotels and restaurants have seen a climb from 27% to 36%.

Consultation on Disclosure Regulations published

The DWP published a consultation on amendments to The Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013 on 3 November 2014.

The proposed amendments are expected to come into force in April 2015. They will ensure that the regulations work as intended in relation to the new public service pension schemes which are being introduced from April 2015 under the Public Service Pensions Act 2013. The DWP have also included some additional drafting amendments to the regulations which were “identified as being desirable”.

The consultation does not include changes which may be required to the Disclosure Regulations as a result of the 2014 Budget flexibilities.

New Actuarial Profession Standard introduced

The Institute and Faculty of Actuaries (IFoA) is introducing a new mandatory Actuarial Profession Standard (APS) in relation to members instructed, or contemplating instructions, to act as an expert in legal proceedings. The APS will come into effect on 1 January 2015 and is accompanied by a detailed Guide, which is available here.

FCA publishes paper proposing a new charge cap in workplace personal pension schemes

The FCA has published a paper proposing new rules for a charge cap for default funds used for automatic enrolment in workplace pension schemes and calling for the ban of certain charging practices.

Automatic enrolment means that it is even more important to ensure that workplace pension schemes deliver the best possible value for money. The FCA has been working with the DWP and TPR to design measures that will help to ensure that all workplace pension schemes are high quality and offer value for money.

These measures include:

• new governance standards
• a proposed charge cap on default funds
• the banning of certain charging practices
• measures to improve the disclosure of costs and charges.

The intention of the proposals is to protect members from high charges and paying for advisory services that they do not need, or that are provided to their employer.

HM Treasury publishes Taxation of Pensions Bill briefing note

HM Treasury has published a Taxation of Pensions Bill briefing note which provides an overview of the measures included in the bill and aims to explain what the bill does.

The Taxation of Pensions Bill implements the money aspects of the flexibilities announced on the 2014 Budget. The non-monthly changes are in the Pensions Schemes Bill.

As well as the publication of the briefing note, the Taxation of Pensions Bill has reached its second reading in the House of Commons.

Pension Ombudsman revamp

The Pension Ombudsman has launched its new website and unveiled a new name – Pension Ombudsman Service. The aim of the rebrand is to provide simpler and clearer information online.  Of particular use is the new determination search feature and updates on group cases, current issues, and latest news.

TPR reports on Kodak and UK Coal

On 3 November 2014, TPR issued two reports under section 89 of the Pensions Act 2004 explaining:

• how it helped to facilitate an innovative rescue plan for Kodak’s UK pension scheme
• its role in facilitating the July 2013 restructuring of UK Coal’s operations, following a major fire which resulted in the closure of the company’s Daw Mill mine.

The Purple Book

The ninth edition of the ‘Purple Book’, published by TPR and the PPF monitors the risks faced by over 6,000, mostly private DB pension schemes.  The data tracked by the Purple Book shows that pension schemes continue to reduce their risk as asset allocation trends continue, but the decrease in equity shares has levelled off as the UK economy continues to recover.

TPR issues additional reminder that all employers need to act as automatic enrolment enforcement activity increases

TPR has issued an additional reminder that all employers need to act as automatic enrolment enforcement activity increases. The new advertising campaign is reaching out to small and micro employers who, in some cases, only employ one or two workers.  The message from TPR is clear: “Act now.  It’s the law.”

The regulator communicates with employers about how they should prepare for automatic enrolment as part of its ‘educate and enable’ approach, including a new advertising campaign launched last week, but will take action to enforce compliance if necessary. The regulator has a range of powers to tackle non-compliance including serving fixed penalty notices and escalating daily penalties notices.

The latest automatic enrolment compliance and enforcement bulletin published by TPR includes details of how many times the regulator has used its statutory powers. It also provides details from recent investigations along with the call to action for small and micro employers.

The period saw a significant rise in the number of employers needing to meet their duties as thousands of medium sized employers who staged in April 2014 reached their deadline to complete their declaration of compliance at the end of August.