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:

• Shared Parental Leave Regulations 2014
• The Payment of Pension Levies for Past Periods Regulations 2014
• New Chair appointed at NEST
• Automatic enrolment evaluation report 2014
• New State Pension: information for employers and trustees with open, contracted-out DB pension schemes
• Government launches campaign to raise awareness of changes to the State Pension
• Automatic Enrolment Evaluation Report 2014
• FRC consults on a new framework for Technical Actuarial Standards
• HMRC publishes minutes from latest meeting of the Pensions Industry Stakeholder Forum
• NAPF releases its tenth annual Engagement Survey
• Lesley Titcomb announced as new Chief Executive of TPR
• TPR shuts down £134m pension ‘liberation’ schemes

Shared Parental Leave Regulations 2014

The Shared Parental Leave Regulations 2014, which come into force on 1 December 2014, introduce a new system of shared parental leave and pay.  Eligible employees will be able to share up to 50 weeks of “shared parental leave” and up to 37 weeks of statutory shared parental pay in relation to children whose expected week of birth begins on or after 5th April 2015.

The position on pensions is the same as for other periods of family leave.  While an employee is being paid:

• their employer will pay pension contributions as if the employee were earning their usual salary
• he or she will pay pension contributions on the basis of the salary they actually receive.

Schemes will need to update their rules to accommodate this change.  Please speak to your usual contact at Sackers for assistance and further details.

The Payment of Pension Levies for Past Periods Regulations 2014

In 2009, the European Commission decided that an exemption in respect of the BT Pension Scheme from payment of a levy to the PPF amounted to incompatible State aid.  The exemption was in relation to pension liabilities covered by a Crown guarantee.  BT challenged the decision but it was subsequently upheld by the General Court in September 2013 and the CJEU on 22 October 2014.  Accordingly, that incompatible State aid is now to be recovered by the UK.

In 2010, regulations were made which, essentially, provided that in relation to schemes with a crown guarantee where an issue in relation to incompatible state aid arose, that scheme would be liable to pay levies to the PPF.  These new regulations deal with the period before 2010.  They provide that the PA04 and regulations made under it, in so far as they relate to the requirement to pay pension levy, have effect as if amendments by the 2010 regulations always had effect.  This means that, where an issue of incompatible State aid arises, there is no exemption for a scheme covered by a Crown guarantee from payment of pension levies and the scheme must pay levies in respect of past periods from the time of the PPF’s inception (6 April 2005).

New Chair appointed at NEST

On 18 November 2014 the Pensions Minister, Steve Webb, announced the appointment of Otto Thoresen as the next Chair of NEST Corporation.

His appointment, which was confirmed in a statement to Parliament, will commence on 1 February 2015 and run for a 5 year term.  Mr Thoresen is currently Director General at the ABI.

NEST is a low-cost, occupational pension scheme that employers can choose to use to meet their automatic enrolment duties.  NEST has a public service obligation to admit any employer which applies to it.

Automatic enrolment evaluation report 2014

This report brings together the latest evidence to show what has happened since automatic enrolment began and updates the indicators the DWP will use to monitor progress throughout implementation.

New State Pension: information for employers and trustees with open, contracted-out DB pension schemes

The current state pension system comprises the basic state pension, the additional State pension (commonly known as S2P but formerly SERPS) which is linked to earnings, and the pension credit (a means tested benefit).

It is possible for employees to “contract-out” of the additional State pension through a personal or occupational pension scheme.

With effect from 6 April 2016, the Government intends to replace the current State pension system with a flat rate single-tier pension (see our Alert for details).  A key consequence of this is that employers will cease to have the option to contract their employees out of the additional State pension on a salary-related basis.  DB contracting-out will therefore also cease to exist from the same date.

On 19 November 2014, the DWP published updated guidance is for employers and trustees on the ending of contracting-out of the additional State Pension from 6 April 2016.

Government launches campaign to raise awareness of changes to the State Pension

On 18 November 2014, Work and Pensions Secretary Iain Duncan Smith and Pensions Minister Steve Webb launched a major new drive to help people understand reforms to the State Pension (for details please see our Alert).

Ministers are urging everyone, and the over-55s in particular, to look at what the changes will mean for them and to secure a detailed State Pension statement so that everyone can plan accurately for retirement.

Under the new system, pensioners will receive around £150 a week if they have 35 years of full-rate National Insurance contributions, but those soon to retire will need to check what it means for them, with transitional arrangements in place as the systems switch over.  The transitional arrangements aim to ensure National Insurance contributions made by those who have spent some of their working life in the old system are recognised.  This will involve the DWP calculating a ‘starting amount’ for the new State Pension based on a person’s record up to April 2016.

As well as explaining how the reforms will affect future pensioners, the new campaign will seek to reassure current pensioners, and those who retire before April 2016, that they will not lose out.  They will remain in the current system and will continue to receive the same basic State Pension.

Automatic Enrolment Evaluation Report 2014

Automatic enrolment aims to increase workplace pension saving in the UK. It forms part of a wider set of pension reforms designed to enable individuals to save towards achieving the lifestyle they aspire to in retirement.

The 2014 report follows the automatic enrolment evaluation report 2013. It brings together the latest evidence to show what has happened since automatic enrolment began and updates the indicators we will use to monitor progress throughout implementation.

FRC consults on a new framework for Technical Actuarial Standards

The FRC is consulting on a new framework for Technical Actuarial Standards (TASs).  The changes aim to ensure that users of actuarial information (such as pension scheme trustees, pension scheme sponsors and insurance company directors) can rely on the quality of actuarial work, including in developing areas of actuarial work where risks to the public interest may not yet have been identified or manifested.

The proposals in the consultation include:

• the introduction of a new FRC actuarial standard (Technical Actuarial Standard 100: Principles for Actuarial Work “TAS 100”) which includes high-level principles applicable to all actuarial work.  TAS 100 will in time replace the FRC’s Generic TASs
• a review of the scope and content of the FRC’s Specific TASs building on the feedback on its recently published discussion paper “Joint Forum on Actuarial Regulation: A Risk Perspective”.

Reponses to the consultation are invited by 8 March 2015.

HMRC publishes minutes from latest meeting of the Pensions Industry Stakeholder Forum

On 24 November, HMRC published the minutes from the meeting of the Pensions Industry Stakeholder forum on 22 October 2014.  Agenda items included:

• pensions flexibility / the Taxation of Pensions Bill
• the Registered Pension Schemes manual
• the consultation on the dependants’ scheme pension legislation.

NAPF releases its tenth annual Engagement Survey

On 24 November 2014, the NAPF released its tenth annual Engagement Survey which looks at pension funds’ engagement with their investee companies, an activity which is generally delegated to their asset managers.

The first NAPF Engagement Survey, conducted in 2004, showed that one third of responding schemes’ considered stewardship activity when selecting investment managers or consultants.  Ten years on, pension schemes’ attitudes have changed markedly, with 80% of respondents stating that they now take stewardship activity into account when selecting their investment managers; for over 50% this extends across all asset classes.

Lesley Titcomb announced as new Chief Executive of TPR

On 20 November 2014, TPR confirmed the appointment of Lesley Titcomb as its new Chief Executive.

Lesley Titcomb, currently Chief Operating Officer and a Board member with the FCA, will take up the post from 2 March 2015.

TPR shuts down £134m pension ‘liberation’ schemes

On 21 November TPR announced that it has put a stop to five connected pension ‘liberation’ schemes that received transfers totalling more than £134 million from over 1,400 individuals.

TPR was concerned that the schemes were established with the main purpose of providing a cash payment to the member, rather than providing retirement benefits, and that this constituted misuse or misappropriation of pension scheme monies within sections 15 and 16 of the Pensions Act 2004, and pension liberation as defined in section 18 of the Pensions Act 2004.

Following an investigation, TPR commenced High Court proceedings in July 2013 against A Admin Ltd, Warwick Pensions Administration Ltd, Lincoln Pensions Administration Ltd, Baxendale Walker LLP, and Paul Baxendale-Walker.

The schemes operated according to complex arrangements that purportedly enabled funds to be ‘lent’ to the member via a company under the member’s control, which would become their employer under one of the schemes.  The member could then use the money as they wished.

The schemes sought to allow members to access their pension funds as cash through a supposed legal ‘loophole’.  In May 2014, the High Court ruled that this supposed gap in the law did not exist, finding in TPR’s favour on three preliminary legal issues.

The defendants (who had previously provided undertakings to the court not to operate the schemes until a full trial of TPR’s claim had taken place) have signed a legally binding agreement confirming that the:

• five schemes are wound up
• relevant defendants no longer act as trustees of the schemes
• schemes are not able to accept transfers from any other pension schemes

TPR has issued a report on the case using its powers under section 89 of the Pensions Act 2004.