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

• The Savings (Government Contributions) Bill
• ABI assembles team to help create Pensions Dashboard
• ABI consultation response on guide to simplifying pensions language
• DWP publishes updated analysis of automatic enrolment statistics
• DWP publishes “State Pension age independent review: interim report with questions”
• FCA thematic review of annuity sales practices
• HMRC publishes new contracting-out bulletin
• OBR analysis of private pensions and savings policy published
• PLSA appointments
• Work and Pensions Committee publishes evidence in PPF and TPR inquiry
• Horton v Henry (Court of Appeal, April 2016)

The Savings (Government Contributions) Bill

Ahead of today’s second reading of the Savings (Government Contributions) Bill in the House of Commons, HMT has published an impact assessment.

According to the Government’s assumptions, the total number of people expected to save into Lifetime ISA accounts in 2017/18 is over 200,000. And with take-up of the Lifetime ISA expected to grow over time, by the 2020/21 tax year, over 800,000 are expected to be contributing. HMT notes that the increase in take-up will be driven by a number of factors, including increasing market coverage of the product and a rise in the number of individuals wishing to use the LISA to save for their first home after the Help to Buy ISA closes to new applicants at the end of 2019.

The House of Commons’ Library has published a briefing paper  which notes that, while there has been a general welcome for new measures to encourage and support saving, concerns have been raised about the potential for the Lifetime ISA to undermine automatic enrolment.

See our Alert for details of the Bill.

ABI assembles team to help create Pensions Dashboard

The ABI is one of the contributors responsible for managing the creation of a prototype pensions dashboard on behalf of HMT and it has now assembled a team to take the project forward.

It is intended that the dashboard, which is due to be up and running in 2019, will enable savers to see all their pension entitlements together online – including their state pension and any DB or DC pensions. The prototype is due to be ready in spring 2017.

Headed up by the ABI’s Director of Long-term Savings and Protection, Yvonne Braun, the team includes Alastair Horn who will direct the delivery of the project, initially supported by two full-time members of staff. Additional technical support will be drawn from within the ABI and from external contributors.

ABI consultation response on guide to simplifying pensions language

In September 2016, the ABI published a guide to simplifying the language used to describe retirement options. The guide has been designed to help ensure that the language relating to the retirement choices introduced in April 2015 is explained to customers across the whole long-term savings sector in a clear and consistent manner.

Publication of the guide follows a consultation in April 2016 on making retirement choices clear. The ABI published its response to this consultation on 13 October 2016.

DWP publishes updated analysis of automatic enrolment statistics

New figures from the DWP show that, by 2020, over 10 million people are expected to be newly saving or saving more as a result of automatic enrolment. The DWP’s projections also indicate that an additional £17 billion a year will be saved into workplace pensions by 2019/20.

These latest figures (released on 13 October 2016), have been updated based on the latest DWP modelling, analysis of the 2015 Annual Survey of Hours and Earnings, and evidence from the employers’ pension provision survey 2015. The figures also take into consideration that three quarters of the total working population are now estimated to meet the age and earnings criteria for automatic enrolment.

The DWP’s figures show that over 6.7 million people have already been automatically enrolled into a workplace pension by more than 250,000 employers.

DWP publishes “State Pension age independent review: interim report with questions”

On 13 October 2016, the DWP published the interim report of Sir John Cridland CBE, part of the independent review of State Pension age, together with a series of questions for consultation which have been identified as key in shaping any future recommendations.

The Pensions Act 2014 requires the government to review SPA during each Parliament. The review is currently gathering evidence and will consider a broad range of factors before making recommendations to the Government in 2017.

The DWP explains that while the review will note existing arrangements already in law, it is forward looking and keen to consider the changing demographic, economic and behavioural landscape of the future. These changes, rather than the present context, will be at the heart of its recommendations on setting the right SPA.

It is hoped that the interim report, and the questions it asks, will stimulate wider discussion. Mr Cridland has called on the public and representative bodies to have their say. The consultation will close on 31 December 2016 and Mr Cridland is expected to make recommendations to the Secretary of State and provide final findings in 2017.

FCA thematic review of annuity sales practices

On 14 October 2016, the FCA published the findings of its thematic review of non-advised annuity sales practices.

The FCA wanted to establish whether firms provided customers with sufficient information about enhanced annuities. It looked at whether firms made customers aware of their potential eligibility for enhanced annuities and whether they encouraged them to shop around in order to get a potentially higher income from another provider. It reviewed non-advised sales of annuities made by pension providers to their customers between May 2008 and April 2015. The FCA looked at the information provided in respect of enhanced (sometimes called impaired life) annuities.

The FCA found no evidence of an industry-wide or systemic failure to provide customers with sufficient information about enhanced annuities through non-advised sales. It found that many of the firms provided clear and comprehensive information to customers with written communication tending to meet the standards required.

However, the FCA did have concerns regarding a small number of firms at which significant communications took place orally – normally over the phone – which was likely to have caused some customers to purchase a standard annuity when they may have been eligible for an enhanced product. These failings were of sufficient concern at a small number of firms that they are now being asked by the FCA to review all non-advised sales from July 2008 and, where appropriate, provide redress; these firms are also being investigated by the FCA’s Enforcement Division to determine whether further action is necessary.

HMRC publishes new contracting-out bulletin

On 14 October 2016, HMRC published countdown bulletin 20, the latest in its series of updates to provide guidance and information to pension scheme administrators in relation to the abolition of DB contracting-out on 5 April 2016.

Among other things, bulletin 20 includes a note on DWP policy and explains that HMRC is looking to consult on a set of miscellaneous, minor and technical amendments to clarify pension regulations relating to former contracted-out schemes. As part of this consultation, the Government is also expected to publish details of a review into how the transitional arrangements for the abolition of contracting-out has worked in practice.

In addition, the bulletin notes that a working group made up of representatives from DWP and leading practitioners from across the pension industry has been working to develop guidance for GMP conversion. HMRC notes that the working group has made good progress, and that it is now in the process of finalising its proposals, with a view to publishing the guidance once this critical work has been completed.

OBR analysis of private pensions and savings policy published

The Office for Budget Responsibility has published a “fiscal analytical paper” on “Private pensions and savings: the long-term effect of recent policy measures”.

Among other things, the paper examines:

• the main tax related private pensions policy measures announced since 2010
• the main tax related savings policy measures announced over the same period
• illustrative long-term estimates of the costs and yields associated with those measures and the uncertainties to which they are subject
• some conclusions that can be drawn from the analysis.

PLSA appointments

The PLSA has announced the appointment of Nigel Peaple as Deputy Director for DC Contribution, Life Savings and Research.

Nigel’s responsibilities include leading the Association’s policy work on DC and lifetime savings, as well as holding responsibility for its research function and EU engagement.

In addition, the appointment of three new council members has also been announced. Mel Duffield (Head of Pensions Strategy and Insight at the Universities Superannuation Scheme) will sit on the DC Council, while Nicola Mark (Head of the Norfolk Pension Fund and is elected practitioner representative on the Local Government Pension Scheme National Advisory Board) and Colin Richardson (a trustee with PTL) will both sit on the DC Council.

Work and Pensions Committee publishes evidence in PPF and TPR inquiry

The WPC has published new written evidence in its inquiry into the PPF and TPR.

In particular, evidence from the PPF contains some “strong, clear recommendations for reform of pensions regulation”. The PPF calls for:

• “more interventionist” regulation of scheme funding
• TPR to have the power to require the winding-up of pension schemes at the request of trustees or the PPF
• TPR to have punitive powers to fine employers who seek to avoid pensions obligations.

Meanwhile, TPR has also called for tighter regulation, including a mandatory clearance process for certain corporate transactions and the power to demand more regular scheme valuations when they have concerns.

On 11 October 2016, Frank Field MP, Chair of the Committee said that: “The Committee has received very important evidence from the Pension Protection Fund on lines we might take in strengthening the proactive powers and abilities of the regulatory machinery. While the Committee will be considering these proposals in detail, the Pension Protection Fund gives us a very useful steer on reforms we may wish to propose to The Pensions Regulator and we will have a chance to put these ideas, amongst many others, to the Regulator when they come before the Committee.”

Horton v Henry (Court of Appeal, April 2016)

The Court of Appeal has upheld the High Court’s decision, confirming that an application from a trustee in bankruptcy for access to a bankrupt’s pensions which were not yet in payment should be rejected.

For full details, please see our case report.