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 updates State Pension top up guidance
• EIOPA publishes annual report
• Eurogroup releases statement on common principles for strengthening pension sustainability
• Intergenerational Foundation report on DB pensions
• National Institute for Economic and Social Research: Webcast – “Brexit” and the State Pension system
• TPR adds first scheme to GPP list

DWP updates state pension top up guidance

On 14 June 2016, the DWP published updated State Pension top up guidance for pension advisers.

The top up scheme was launched by the DWP in October 2015 and aims to help anyone who reached State Pension age before 6 April 2016 (the date on which the new State Pension was introduced) to safeguard their long-term financial security. Men aged 65 and over, and women aged 63 and over, have the chance to increase their State Pension by up to £25 a week, by buying additional State Pension to give them “guaranteed extra income for life”.

Applications to join the scheme must be made by 5 April 2017. Anyone interested in the scheme is advised to seek advice to ensure this option would be right for them.

EIOPA publishes annual report

EIOPA has published its annual report for 2015.

The report aims to give a “comprehensive and thorough account” of the activities carried out by EIOPA in the implementation of its mandate and programme of work during 2015, providing a “detailed overview of tools and projects EIOPA used to safeguard the application of EU law and to guarantee a level playing field as well as to prevent regulatory arbitrage in the internal market.”

The report states that “for EIOPA’s work in the pensions’ area, the year 2015 was remarkable”, noting its undertaking of the first EU-wide stress test for occupational pensions, and its continued work towards the creation of a pan-European Personal Pension product.

Eurogroup releases statement on common principles for strengthening pension sustainability

On 16 June 2016, the Eurogroup endorsed a set of common principles for strengthening the sustainability of pensions in the Eurozone. The Eurogroup is an informal body in which ministers from the Eurozone (those member states which have adopted the Euro as their official currency) discuss matters relating to their countries’ common responsibilities.

The Eurogroup considers that significant progress has been made in improving pension sustainability, but acknowledges that significant risks remain in many member states, especially over the medium term. It therefore notes that “further policy action is needed to strengthen the resilience of public pension systems to adverse demographic and macroeconomic developments and to guard against the risk of reform reversal”.

The common principles put forward include safeguarding against demographic and macroeconomic risks, developing ‘flanking’ policies aimed at extending working lives and thereby boosting retirement incomes, broader reforms to strengthen growth and employment, and ensuring political and societal support for the reforms.

Intergenerational Foundation report on DB pensions

The Intergenerational Foundation (IF) has today (20 June 2016) published a report on research it has carried out on spending by UK private companies on their DB pensions.

The report, “DB Pensions: Choking Hazard – How defined-benefit schemes are throttling the UK economy”, notes that an average older worker in a DB scheme receives pension contributions worth £23,600 a year, equivalent to about 20 times the amount an average younger colleague in a DC scheme receives, at just £1,200 a year. The research also found that UK private companies are spending some £42 billion a year on the DB pensions of their older pension scheme members, which is preventing them from expanding, investing, or increasing the pay and pension contributions of younger staff members.

The report’s launch has been timed to coincide with the ongoing parliamentary inquiry led by Frank Field MP, which is looking at the adequacy of DB pension scheme regulation and regulatory powers. The IF hopes that the current parliamentary inquiry will recommend reforming company pensions so that all generations are treated fairly. This could include adjustment of pensions for inflation, greater contribution to economic growth by pension scheme investments, changes to the tax system to correct past unfairness, and the possible restructuring of pension schemes so that they pay-out only on the resources they already have.

National Institute for Economic and Social Research: Webcast – “Brexit” and the State Pension system

As we reported in 7 Days on 6 June 2016, NIESR has published a report on IFoA commissioned research into “The Impact of Possible Migration Scenarios After ‘Brexit’ on the State Pension System”.

NIESR has now released a webcast in which Dr Angus Armstrong, Head of Macroeconomics, lists the main conclusions of the research that looks at how changes in migration levels could affect the sustainability of the State Pension system. Dr Armstrong also explains in detail which policy options the UK government has in order to offset these changes.

Also in the webcast, Derek Cribb, Chief Executive of the IFoA, recommends that policymakers look closely at the possible consequences of policy development and that they take the recommendations of the IFoA’s research to heart.

TPR adds first scheme to GPP list

Today (20 June 2016), TPR has announced the inclusion of the first group personal pension on its new list of GPPs that are open to any employers.

Aviva’s Company Pension is the first GPP on the list, which was announced as open for applications in April 2016 (see 7 Days dated 3 May 2016).

As TPR explains, GPPs added to the list must be open to all employers and meet a number of other criteria, including confirming that their independent governance committee or governance advisory arrangement has assessed the product on offer.

The new list sits on the employer’s section of TPR’s website, alongside a list of master trusts which are open to all employers and which have been independently reviewed against the voluntary master trust assurance framework. TPR believes that well-run multi-employer master trusts and GPPs are a good choice for small and micro employers preparing to meet their workplace pension duties.

TPR’s Executive Director for Automatic Enrolment, Charles Counsell, said that: “There is a wide choice of well-run, scalable and sustainable schemes which are available to all employers. I expect further GPPs and master trusts to be added to our lists in the coming months.”