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

• HMRC publishes draft regulations in relation to the abolition of contracting-out
• The Judicial Pensions (Contributions) (Amendment) Regulations 2016
• DWP publishes report on the long-term impact of the new State Pension
• FRC reports on compliance with UK Corporate Governance Code
• Further debate to be held on transitional State Pension arrangements for women born in the 1950s
• Work and Pensions Committee launches intergenerational fairness inquiry
• Cherry vs The Police and Crime Commissioner of South Wales (Pensions Ombudsman) – 22 December 2015

HMRC publishes draft regulations in relation to the abolition of contracting-out

Legislation prescribes the information that employers are required to report to HMRC for the purposes of calculating contributory benefit entitlement and administering the NICs system. The abolition of contracted-out rebates from 6 April 2016 allows for a simplification of the requirements.

On 11 January 2016, HMRC published draft regulations which are designed to make consequential changes arising from the abolition of contracting-out “for information and technical comment”. The amendments cover changes to employers’ reporting requirements from 6 April 2016 as a consequence of the abolition of the contracted-out rebate.

At the same time, HMRC published a Tax Information and Impact Note (TIIN) in relation to the changes.

Comments on the draft regulations should be submitted by 5 February 2016.

The Judicial Pensions (Contributions) (Amendment) Regulations 2016

The Judicial Pensions (Contributions) (Amendment) Regulations 2016 were laid before Parliament on 15 January 2016, and will come into force on 5 February.

These regulations change the rate at which contributions are to be paid by members of certain judicial pension schemes, in order to align them with the rates paid by members of the pension scheme established by the Judicial Pensions Regulations 2015.

DWP publishes report on the long-term impact of the new State Pension

On 14 January 2016, the DWP published its report into the long-term effects of the new State Pension on individuals’ pension entitlements, looking at the period up to and including 2060.

The data shows the long-term impact of the new State Pension on people’s pensions, with over 75% of women and over 70% of men gaining in the first 15 years of the new State Pension. However, the report notes that “this proportion then begins to gradually diminish over time, falling to around two thirds by 2040 and just over half by 2050.”

This paper follows on from a DWP report published on 3 December 2015, explaining the impact of new State Pension on an individual’s pension entitlement during the first 15 years. It gave the possible reasons why an individual’s outcomes might look different than under the current system, and allowed stakeholders to clearly see implications broken down by year and gender.

The figures in the new report also show that 90% of people who will pay NI at the standard rate from April, as a result of the cessation of DB contracting-out, will receive enough State Pension over their retirement to offset the increase in NI contributions.

The report notes that now the new State Pension rate has been set (at £155.65 per week), no further assessments of the impact of the new State Pension will be released. However the DWP will continue to monitor the impact of the reforms post April 2016.

On 13 January 2016, the House of Commons Library also published a briefing paper looking at the transitional arrangements and the “gainers and losers” from the introduction of the new State Pension.

FRC reports on compliance with UK Corporate Governance Code

The overall quality of corporate governance in the UK remains high, according to the FRC’s Developments in Corporate Governance and Stewardship 2015 report, published on 14 January 2016.

It reports a “slight dip in strict compliance” with the Stewardship Code which is largely accounted for, according to the FRC, by new entrants to the market explaining evolving governance, and companies deciding to await the implementation in law of the EU Audit Regulation and Directive requirements on audit retendering and rotation. The report does however note that “this has been accompanied by an improvement in the quality of explanations, which demonstrates a more thoughtful approach to governance”.

The FRC hopes that their proposal to tier signatories, announced in December last year, will promote better engagement as currently, reporting against the Stewardship Code’s principles is said to be “of inconsistent quality”.

Further debate to be held on transitional State Pension arrangements for women born in the 1950s

The Petitions Committee has scheduled a debate in Westminster Hall on the transitional State Pension arrangements for women born in the 1950s. As a consequence of a petition initiated by the campaign group Women Against State Pension Inequality (WASPI), a debate will take place on 1 February 2016. Westminster Hall debates give MPs an opportunity to raise local or national issues and receive a response from a government minister, but do not give MPS the opportunity to vote on the issue.

As we reported in 7 Days on 11 January 2016, a previous debate took place on 2 December 2015, and on 7 January 2016 in a backbench business debate the House voted in support of a motion tabled by Mhairi Black calling for transitional arrangements for women negatively affected by SPA equalisation. However, votes for such motions are not binding on the Government.

A House of Commons Library paper has been published in relation to the debate of 7 January 2016, and the surrounding issues.

Work and Pensions Committee launches intergenerational fairness inquiry

On 13 January 2016, the Work and Pensions Committee launched an inquiry into intergenerational fairness in retirement. The inquiry aims to answer the question of whether the current generation of people in or approaching retirement will, over the course of their lifetimes, have enjoyed and accumulated much more housing and financial wealth, public service usage, and welfare and pension entitlements than more recent generations can hope to receive.  Questions the Committee is looking to address include whether the “triple lock” is necessary to prevent future increases in pensioner poverty. The deadline for written submissions is 19 February 2016.

Cherry vs The Police and Crime Commissioner of South Wales (Pensions Ombudsman) – 22 December 2015

The PO upheld a complaint against the Police and Crime Commissioner of South Wales on the basis that it had a duty of care as an employer to inform an employee of the tax implications of re-employment on his retirement benefits.  Its failure to do so led to the employee incurring tax charges on his benefits.

For further detail, please see our case report.