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:

• DWP publishes auto-enrolment research
• Independent review of consumer prices statistics
• HMT issues update on delivering pensions guidance
• PO publishes pension liberation update
• PO appoints interim Chief Executive
• TPAS and ABI launch new social media campaign tackling Pension Scams

DWP publishes auto-enrolment research

On 5 January 2014, the DWP published the findings from a survey of 50 employers with between 90 and 499 workers who staged automatic enrolment between January 2014 and July 2014.  The findings include information on:

• employers’ experiences of preparing for automatic enrolment
• implementation of automatic enrolment
• communication of automatic enrolment to workers
• opt out rates and impact of automatic enrolment on participation in workplace pensions
• worker reasons for opting out
• ongoing administration of automatic enrolment
• employers’ thoughts on the future of workplace pensions
• advice for other employers.

HMT issues update on delivering pensions guidance

The new retirement options for DC members, which were announced in the Budget 2014, will be introduced on and from 6 April 2015 (see our Alert for details).  The government is setting up a free and impartial guidance service (to be known as Pension Wise) to help individuals understand their options.

On 12 January 2015, HMT published an update to explain the progress that has been made in setting up the service.

HMT hopes that aspects of the service, across all three channels, will be tested, piloted and rolled out ahead of April.  A simple landing page for the website has already gone live, and website users can now register their interest in the Pension Wise service, say what aspects of the service they are most interested in, and provide their input on the ongoing service design.  Some of those registered will also be invited to participate in the ongoing programme of user testing, pilots and trials as the service is refined and developed, providing valuable feedback and insight.

A public pilot of the online guidance service is planned to start in February; this may be of particular interest to those who have deferred their pension choices since the Budget announcement, and who may welcome some initial information on their options.

The contact centre, through which telephone and face to face appointments can be booked, will be available from March.

HMT will bear the 2014 / 2015 set-up costs of the Pension Wise service.  The ongoing cost will be funded by an FCA administered levy on regulated financial services firms.

Independent review of consumer prices statistics

The UK Statistics Authority published Paul Johnson’s independent review of UK consumer prices statistics on 8 January 2015.The Authority will consider his recommendations in detail and will undertake a full public consultation in the summer of 2015.

Prices statistics are an essential (and hotly debated) tool in the pensions industry as many pensions are required to be linked to an inflationary measure in payment or in deferment. In 2010, the Government switched the statutory inflationary measure from RPI to CPI. But the ONS has been looking at the composition of the inflationary methods for some time – in 2013 ONS concluded it would not change the calculation method of RPI but would start to publish a new measure – RPIJ.

Paul Johnson’s report finds that, other than not accounting for owner occupiers’ housing costs, the Consumer Prices Index CPI is a well constructed measure of inflation. Users should have confidence in it. However there is “an unhelpful proliferation of price indices in the UK at present”. He agrees with the view set out by the National Statistician that there are basic statistical flaws in the construction of the RPI and that the RPI is not a good measure of inflation.

Paul Johnson made a number of recommendations – but the following are likely to be of most interest to those in the pensions industry:

• The ONS should move towards making the Consumer Prices Index including owner occupiers’ housing costs (CPIH) its main measure of inflation.
• Government and regulators should move towards ending the use of the RPI as soon as practicable and, where they decide to keep using it, the Authority should ask them to set out clearly and publicly their reasons for doing so.

PO publishes pension liberation update

On 9 January 2015, the PO published a further three determinations connected with “pension liberation” or “pension scams”.  They follow the publication, on 16 December 2014, of the case of “Mr X” who had transferred almost £370,000 to a scheme investing in storage units and was unable to recover the money.

In the cases published last week, the complainants had all wanted to transfer away from personal pensions to schemes, different in each case, which were said to be an occupational pension scheme registered with HMRC.  The providers of the personal pensions, also different in each case, had declined to make the transfer.

The Ombudsman’s approach

The Ombudsman considered whether the scheme members had a legal right to the transfer they had asked for, either in statute or under the transferring scheme’s own provisions.

The Ombudsman found that there was no statutory right to a transfer in any of the cases.  But in none of them had the provider carried out the analysis to establish that.

As a secondary matter the Ombudsman considered whether the providers’ approaches had been consistent with their regulatory obligations, noting in two of the cases that the FCA regulated providers went beyond TPR’s guidance.

However, in his concluding remarks the Ombudsman acknowledged that schemes and pension providers “find themselves in a highly unenviable position”.  He said that suspicions about pension liberation may justify delay for the asking of relevant questions.  Strictly, though, a transfer could only be withheld beyond the statutory period for payment if there was no right to it.  If, after enquiry, the trustees or providers concluded there was no right they should be able to justify that.

The three cases reflect the environment in relation to tax registration and regulatory guidance as it was when the applications to transfer were made.  There have been changes since, particularly in registration requirements.  However, the three cases, alongside that of “Mr X”, illustrate the difficulties for schemes and providers in dealing with possible pension liberation.  Mr X took a transfer and may have lost all his money: Mrs Kenyon, Mrs Jerrard and Mr Stobie wished to make similar transfers and perhaps would have lost theirs too (though the Pensions Ombudsman Service had no evidence of that). But if the transferors had had a statutory right that they were determined to enforce, even in the face of severe warnings, then, after the providers had made such enquiries as thought necessary to establish whether the right existed, the providers could not have further resisted payment.

We will publish summaries of the three new decisions shortly.

PO appoints interim Chief Executive

Simon O’Brien, who is presently the chair of the police ombudsman commission in Ireland (the Garda Síochána Ombudsman Commission), is to become the PO Service’s interim Chief Executive.  He has previously held senior posts in the Irish police inspectorate and the Metropolitan Police.  He is expected to take up his new role at the beginning of February.

The interim Chief Executive post is a new one, created following the recent departure of the PO’s Casework Director, Kim Parsons and in anticipation of the appointment of a new PO to take up that post when Tony King stands down in the Spring.

TPAS and ABI launch new social media campaign tackling Pension Scams

TPAS and the ABI have launched a collaborative online social media campaign to help raise consumer awareness about the risks and consequences of pension scams.  The campaign aims to highlight to consumers how valuable their pension is and the processes scammers use to get their hands on individuals’ savings and information.