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On 12 May 2014, the Institute and Faculty of Actuaries (IFoA) published a new report “How pensions can help meet consumer needs under the new social care regime”.

A key finding of the review was that just 8% of men and 15% of women entering care aged 85 today are likely to reach the new social care cap that is being introduced in 2016.  The cap, which is planned to be set initially at £72,000 will, the IFoA says, act as a safety net that will prevent individuals from facing catastrophic care costs.  However, it will not offset or replace savings as a key means of funding care.

Thomas Kenny, one of the authors of the report, said:

“Second to property, pensions are the largest wealth asset for most people.  Pensions are largely understood, there is an existing savings framework for them and, with the right tax incentives and flexibility, there are products that could help people to meet any care needs that they may have in the future….In the report we consider a number of existing and new products which, with the right tax incentives, could help people plan ahead, including a new Pension Care Fund.”

The Pension Care Fund would be a ring fenced long term care savings fund that would sit within the framework of a DC pension scheme.  The savings would be treated for tax purposes like a pension and any money accumulated that was not used to fund care could be passed on, free of inheritance tax, for use as a long term care fund by a spouse or other beneficiary.

Local Government Minister Brandon Lewis has published proposals for better pension management that could deliver substantial annual savings for taxpayers.

The proposals draw on a public call for evidence and a report from city pensions experts, Hymans Robertson, who reported that the cost of investment in England and Wales was £790 million, much higher than previously thought.

The government’s proposals aim to reduce investment management overheads and achieve a higher level of accountability to local taxpayers including through an improvement in the availability of transparent and comparable data.

The savings outlined in the consultation are comprised of 2 main elements:

Following the consultation, the government will consider the responses as it firms up its proposals for reform.

On 8 May 2014, the DWP issued a consultation asking for views on proposed legislative changes which follow on from the abolition of DB contracting-out, together with draft regulations.

Provisions in the Pensions Bill 2013/14 will provide employers with a unilateral power to amend their schemes to take account of the increase in their NICs.  This consultation comprises two sets of draft regulations which set out:

For further details please see our Alert.

On the 16 December 2013 HMRC issued a ‘What’s New’ message regarding the introduction of its new Scheme Reconciliation Service for contracted-out pension schemes and launched the on-line request form.

It has now issued an update on the current position in relation to the service.  The update includes information on:

There are now standard and enhanced versions of HMRC’s AA calculators.

The new standard calculator is for customers who have not previously needed to consider the use of carry forward for any of the previous three tax years.

On 12 May 2014, the PPI published the briefing note: Freedom and Choice in Pensions – comparing international retirement systems and the role of annuitisation.

The briefing note finds that, while the demand for annuities is expected to fall in the short term as a result of the new freedoms and flexibilities being announced, improved annuity products may still prove to be an attractive retirement income solution for some groups in the future.

The PPI’s review of international retirement systems highlights a number of factors that affect the demand for annuities across different countries which will be relevant to how the market develops in the UK.  These include:

On 8 May 2014, the PPF updated its valuation assumption guidance for both section 179 and section 143 valuations.

By law, the PPF has to set its valuation assumptions to reflect pricing in the bulk annuity market.

The new assumptions, which take effect from 1 May 2014, have been set following talks with insurers earlier in the year and confirmed with respondents following a consultation.

The PPF will be monitoring the market closely so that any changes can be reflected in the assumptions as and when the CPI market develops.

In summary, the assumption changes are to: