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

• Registered Pension Schemes (Provision of Information) (Amendment) Regulations 2016
• DWP publishes response to consultation on Occupational and Personal Pension Schemes (Miscellaneous Amendments) Regulations 2016
• DWP publishes guidance on banning member-borne commission
• DWP publishes response to consultation on simplifying auto-enrolment processes
• DWP guidance on state pensions updated
• FCA / HMT publish FAMR final report
• FCA encourages pension providers to review distribution and marketing arrangements
• FRC publishes amendments to FRS 102
• PLSA launches DB Taskforce
• PO issues further statement in relation to police and firefighters’ cases
• PPF announces closure of FAS to new applications
• PPI publishes report on consumer financial advice and guidance for high risk DC savers
• TPR publishes guide on annual benefit statements for public service pension schemes
• TPR warns over failure to complete scheme return
• PO: Ascough v Worcestershire County Council

Registered Pension Schemes (Provision of Information) (Amendment) Regulations 2016

The Registered Pension Schemes (Provision of Information) (Amendment) Regulations 2016 were laid before Parliament on 9 March 2016.

The regulations make changes to the information requirements for administrators (generally, the trustees) of a registered pension scheme in consequence of the introduction, from 6 April 2016, of the tapered AA. (For further details in relation to the tapered AA, please see our Alert.)

In connection with the AA taper, all Pension Input Periods open on 8 July 2015 were automatically closed on that date, with the next pension input period running from 9 July 2015 to 5 April 2016. All subsequent PIPs will be concurrent with the tax year from 2016/17 onwards (this is the case even if members are not affected by the taper). The regulations specify how the information requirements will apply for the 2015/16 tax year, the default position being that the 2015/16 tax year will be treated as a single tax year. Trustees will therefore only be required to provide a pensions savings statement for the 2015/16 tax year if either:

• a member’s PIP for the whole tax year exceeds £80,000
• a member’s PIP for the post-alignment tax year exceeds £40,000.

When the regulations were originally published in draft, they included a requirement to provide a pensions savings statement to individuals whose pensionable earnings exceed £110,000 in the tax year (the lower threshold for the tapered AA). Most respondents thought that this requirement would be extremely burdensome for pension schemes as they do not hold this information. They also identified that this would be extremely burdensome for schemes linked to multiple employments. Individuals with income of £110,000 or more will still be able to request a statement, but the scheme will not be required to provide one unless they are asked to do so by the individual.

DWP publishes response to consultation on Occupational and Personal Pension Schemes (Miscellaneous Amendments) Regulations 2016

On 7 March 2016, the DWP published the Government’s response to the consultation that sought views on minor and technical regulatory changes to four areas of pensions legislation, to ensure that the new pension flexibilities operate as intended. The consultation also contained a call for evidence on how the Government should simplify the valuation process for the purposes of the new advice requirement for pensions which contain a guaranteed annuity rate (GAR). Please see our response to the original consultation for further details.

The changes agreed include technical changes required to allow the pension flexibilities to operate in specific situations (for example, on scheme wind-up, forfeiture and the preservation of benefits), and changes in relation to the PPF, including amendments to the regulations around schemes whose sponsoring employer cannot have an insolvency event.

In addition, changes to disclosure of information requirements are being brought in to help create a “second line of defence”, placing an obligation on trustees of occupational schemes to give risk warnings to scheme members who wish to take their benefits flexibly. The risk warnings will need to be provided when the scheme provides the member with the means to apply to access their benefits, whether this is at the same time as the member receives their information on retirement options or subsequently, rather than in an additional communication, as originally proposed.

Some of the amendments proposed in respect of pension sharing on divorce (in particular, the introduction of a requirement that, where an attachment (or “earmarking”) order exists, schemes will have to write to the former spouse at the point the member applies to take their flexible benefits, informing them that the member has chosen to take their benefits) have been to delayed “until a later date, in order to allow more time to consider these complex issues”.

The Government’s response contained the two new sets of regulations, laid before Parliament on 7 March 2016: The Pension Protection Fund and Occupational and Personal Pension Schemes (Miscellaneous Amendments) Regulations 2016 and The Pension Sharing (Miscellaneous Amendments) Regulations 2016. They will both come into force on 6 April 2016.

DWP publishes guidance on banning member-borne commission

On 8 March 2016, the DWP published guidance for service providers and trustees or managers of occupational pension schemes on banning member-borne commission in automatic enrolment pension schemes. The guidance was published following the public responses to the consultation on draft regulations relating to the proposed ban.

The Occupational Pension Schemes (Charges and Governance) (Amendment) Regulations 2016 were laid before Parliament on 8 March 2016. They will come into force on 6 April 2016.

DWP publishes response to consultation on simplifying auto-enrolment processes

On 10 March 2016, the DWP published their response to the consultation on regulations to simplify automatic enrolment processes and reduce burdens on employers. The response document confirms that the formal written responses received were broadly supportive of the aims of the regulations, with respondents agreeing that they would reduce burdens. For further detail, see our response to the consultation.

The measures include new exceptions to the employer duty to enrol individuals in certain circumstances (for example, in relation to “genuine partners in LLPs” and certain company directors), with the original duty becoming a discretion. The Government has decided to go ahead with the LLP exception, despite noting that several respondents had queried whether the exception was in fact necessary, given that LLP members’ remuneration is unlikely to be caught by the “qualifying earnings” provisions of the automatic enrolment legislation.

The Occupational and Personal Pension Schemes (Automatic Enrolment) (Miscellaneous Amendments) Regulations 2016 were laid before Parliament on the same day and will come into force on 6 April 2016.

DWP guidance on state pensions updated

On 11 March 2016, the DWP published an updated version of its “Your State Pension explained” literature. These leaflets are designed to help people understand the changes to the state pension scheme from 6 April 2016 and include sample questions and answers.

The latest version contains added information about the Contracted Out Pension Equivalent (COPE).

FCA / HMT publish FAMR final report

The Financial Advice Market Review (FAMR) published its final report on 14 March 2016. In its press release, the FCA note that the review has found that there is a clear need for intervention by regulators and government to help both consumers and industry benefit from new and more cost-effective ways of delivering high quality advice and guidance.

The aim of the review has been to explore ways in which individual and collective steps can be taken to stimulate the development of a market to deliver financial advice and guidance, with recommendations outlined in the report aimed at:

• providing affordable advice to consumers
• increasing the access to advice
• addressing industry concerns relating to future liabilities and redress, without watering down levels of consumer protection.

FAMR outlines practical ways to enable consumers to engage with and access advice and guidance, urges changes to the way in which financial advice is defined and suggests a new advice framework to help firms best meet the needs of consumers.

The aim is that the FCA and HMT should work together over the next twelve months to monitor the development of the advice market and to report jointly to the Economic Secretary and FCA Board on progress made towards implementation. In 2019, both organisations are expected to conduct a review of the outcomes from FAMR.

FCA encourages pension providers to review distribution and marketing arrangements

On 11 March 2016, the FCA issued a press release welcoming action taken by pension providers to strengthen competition compliance. As part of its Retirement Income market study published in March 2015, the FCA reviewed a number of distribution arrangements and strategies of different pension providers.

As a result of its review, the FCA discovered that some meetings in relation to distribution arrangements “appeared to operate without any competition compliance protocol”. The FCA notes that the targeted firms have now undertaken a number of initiatives to strengthen competition compliance including:

• reviewing and self-assessing the arrangements in question as well as other similar arrangements that they have in place
• introducing and/or reviewing and updating their competition compliance protocols
• ensuring that all key staff receive competition law training, and that this is regularly reviewed and updated.

The FCA encourages other firms to review their distribution and marketing arrangements to ensure that they comply with competition law.

FRC publishes amendments to FRS 102

On 8 March 2016, the FRC published amendments to FRS 102, revising the disclosure requirements for financial institutions and retirement benefit plans.

The aim of the draft amendments, which relate to the disclosure of financial instruments in an analysis based on the fair value hierarchy, is to simplify compliance and increase consistency with disclosures required by the International Financial Reporting Standards.

This revised hierarchy applies to accounts for scheme years starting on or after 1 January 2017, with early adoption permitted.

PLSA launches DB Taskforce

On 10 March 2016, the PLSA announced that it had launched a taskforce “to tackle the problems faced by defined benefit pension schemes”. The Taskforce is made up of a group of industry experts and academics, who aim to seek views and evidence from schemes, sponsors, regulators, government and intermediaries to “get to the heart of the issues” affecting DB schemes.

Joanne Segars, Chief Executive of the PLSA, said: “The issue cannot be ignored because there are around 16 million people in DB schemes and the health of those schemes can also have a material effect on employers, government and the wider economy”.

The Taskforce intends to report its initial findings in Summer 2016, with recommendations to Government due to be announced in the Autumn (at the PLSA annual conference), to help ensure that DB pensions are sustainable for the long-term.

PO issues further statement in relation to police and firefighters’ cases

Back in May 2015, the PO issued his Determination in a case brought by Mr Milne, a retired Scottish firefighter, against GAD (see our 7 Days of 18 May 2015). The Determination found GAD guilty of maladministration in failing to update the factors used in the calculation of firefighters’ lump sum pension payments. The PO issued further guidance to members regarding the case on 1 September 2015.

A further update was published by the PO on the Firefighters’ Pension Scheme and the Police Pension Scheme on 10 March 2016. The statement makes it clear that the PO will not accept complaints from individuals who claim that, despite the payments directed in the Milne determination, they remain out of pocket: “The making of these additional payments draws a line under the complaint regarding the review of commutation factors.” However, the PO does confirm that complaints, should they arise, about the non-payment of additional payments, will be considered.

PPF announces closure of FAS to new applications

The PPF announced on 9 March 2016 that the FAS will close to new schemes from 1 September 2016.

Trustees, advisers, former trustees and/or former advisers of any pension scheme believed to be a qualifying scheme not yet notified to FAS are encouraged to notify as soon as possible. Members currently receiving, or with a deferred entitlement to receive, assistance payments from the FAS are stated not to be affected by the announcement.

PPI publishes report on consumer financial advice and guidance for high risk DC savers

The PPI published a report on 8 March 2016 which analyses the demand for and the supply of financial advice and guidance in the DC market, along with some of the options that might bring these in line with each other. The report, commissioned by LV=, provides an overview of some of the options, noting that further investigation would be required to evaluate each option in order to assess the potential outcomes from these options.

TPR publishes guide on annual benefit statements for public service pension schemes

On 8 March 2016, TPR published guidance for public service pension schemes on issuing annual benefit statements, plus an at-a-glance checklist to help with their planning. The LGPS for England and Wales was required to issue annual benefit statements to active members by the end of August 2015, and the requirement will apply to all other public service schemes by the end of August 2016.

Andrew Warwick-Thompson, Executive Director for Regulatory Policy at TPR, said: “Annual benefit statements are critical in helping scheme members to plan and make key decisions about their retirement. We know the process can be complex and the timescales challenging, so we urge schemes to start planning without delay.”

TPR warns over failure to complete scheme return

TPR has issued a warning to trustees, in a press release on 14 March 2016, that they face being fined if they fail to complete their scheme returns.

TPR is concerned that trustees of some DC schemes are not meeting their basic duties – its latest figures show that DC scheme return completion rates have fallen for the second year running, down 18% between January 2014 and January 2016.

As a result, TPR is sending letters to a group of trustees who are in breach of the law to warn them to complete their 2015 scheme return or risk facing a fine. TPR state that they will also consider publishing details of trustees who have failed to complete their scheme return.

PO: Ascough v Worcestershire County Council

In this case, the PO held that there was no duty upon an employer to inform a member of the availability of an enhanced ill health pension.

For full details, please see our case report.