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:

• Money purchase regulations delayed
• FCA publishes final guidance on annuity comparison websites
• NAPF calls for action to help schemes smoothly manage DB run-off
• PPI provides evidence to Scottish Parliament Finance Committee
• PPI publishes transitions to retirement research
• TPR publishes latest research on record-keeping
• TPR v A Admin Limited and others

Money purchase regulations delayed

On 6 May 2014, the DWP published final Regulations following the October 2013 consultation paper on reclassifying DC benefits in the wake of the Bridge Trustees case.  The Supreme Court’s July 2011 decision in Bridge Trustees concluded that it was possible for certain benefits to be within the definition of “money purchase benefits” despite there being a potential mismatch between assets and liabilities.

Due to procedural problems, on 18 June 2014 the Regulations were withdrawn.  They will be replaced with two sets of regulations containing the same provisions.  For details, please see our Alert.

The first of these were published on 17 June.  The second set will be published when they are laid in Parliament.  At the same time, the DWP will publish a revised response to the consultation with references to the new regulations.  To avoid confusion, the DWP has removed the response which was published on 6 May.

The intention is for these two sets of new regulations to become law by the end of July 2014.

FCA publishes final guidance on annuity comparison websites

The FCA carried out a thematic review of 13 annuity comparison websites to assess whether they were fair, clear and not misleading, in accordance with its rules.  In conducting its reviews it identified a number of common issues.  It found good practice in the presentation of alternative options to buying an annuity, such as deferring or pension drawdown, and the use of jargon-free language. All of the websites reviewed raised concerns, however, with key information and risk warnings often missing or insufficiently prominent.

The guidance, which has now been issued in final form, is intended to:

• make clear the FCA’s expectations of firms
• improve the level of compliance across the sector, level the playing field for firms and
• ultimately lead to better consumer outcomes.

NAPF calls for action to help schemes smoothly manage DB run-off

On 17 June 2014, the NAPF launched a report which calls for immediate action in three areas to help DB schemes and their sponsors navigate the DB transition as smoothly as possible.

The report, “DB run-off: the demand for inflation-linked assets” explains that as DB schemes mature there is likely to be a continuing increase in liability hedging among DB schemes and also highlights the gap between supply and demand of index-linked gilts.  The concern is that if schemes are unable to access the assets they need to adequately meet their cash flows and hedge their liabilities, this is likely to expose scheme sponsors to increases in deficit volatility and put more pressure on them to support funding levels.

The NAPF has identified three areas that require action to help pension schemes:

• increased issuance of index-linked gilts
• better availability of alternative inflation-matching assets
• development of a framework that allows for more flexible models of DB pensions provision.

PPI provides evidence to Scottish Parliament Finance Committee

The PPI has provided the Scottish Parliament Finance Committee with written evidence on the potential impact of Scottish Independence on State Pensions in Scotland.

Chris Curry, Director of the PPI said: “The increased state pension spending implied by the plans of the Scottish Government is not necessarily unaffordable.  However, the Scottish Government would need to either raise higher revenues (for example through taxation), reduce spending in other areas (for example where demographic pressures are less), or have higher Government debt levels”.

PPI publishes transitions to retirement research

On 17 June 2014, the PPI confirmed the launch of a new research series on “Transitions to Retirement”.  The research will explore the complexity of decision making for savers in DC pension schemes at retirement, the scope for innovation in developing flexible retirement income solutions in the UK, and the implications of the new Budget freedoms for providing defaults and improving member engagement and communications.

TPR publishes latest research on record-keeping

On 19 June 2014, TPR published the findings of its 2014 record-keeping survey.  Key points include:

In respect of common data (items applicable to all schemes to uniquely identify a member, for example name, NI number, date of birth etc):

• 63% of members of all trust-based schemes are in schemes that have a common data score of more than 95%
• large schemes perform better, with 64% of schemes having a data score of 95% or greater, compared with 33% of small schemes.  Only 9% of large schemes had not measured their data, compared with 44% of small schemes
• there is a year on year increase in DB and DC schemes hitting the 95% common data score level
• there was no significant change in the proportion of schemes failing to measure their common data

In respect of conditional data (dependent on scheme type, structure and system design):

• overall, 32% of members are in schemes that have a conditional data score of more than 90%, with year on year increases across all scheme types
• there continues to be a high proportion of schemes where conditional data is not formally measured
• large schemes are more likely to have measured their conditional data.

For the first time in this survey, TPR asked schemes if they were going to be used for automatic enrolment.  Of those schemes to be used for this purpose, 64% had a common data score of 95% or greater, and 34% had a conditional data score of 90% or greater.

TPR v A Admin Limited and others

In this case, the court ruled on certain preliminary issues in relation to a suspected pension liberation scheme.

Broadly, these issues concerned whether:

• the trust in question was void for uncertainty
• section 91 of the Pensions Act 1995 applied in this case.

To read the full case report click here.