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 publications
• DWP announces extra support for partners of armed forces personnel
• Automation in financial advice
• EIOPA makes statement on internet sales of insurance and pension products
• FCA publishes Retirement Income Market Data: October – December 2015
• FCA publishes Business Plan 2016/17
• FCA publishes fees and levies rates proposals for consultation
• HMRC publishes pensions taxation materials
• HMRC issues latest “Countdown bulletin” on the abolition of DB contracting-out
• HMRC Pension Schemes Newsletter 77
• HMT issues guidance on the indexation of public service pensions
• PPI issues analysis of the impact of the new state pension
• PPI issues Briefing Note 80

DWP updates state pension publications

The DWP has published a suite of updated booklets and guidance in the wake of the introduction of the new state pension on 6 April 2016.

The documents include a state pension top up booklet and guidance for pension advisers on the state pension top up. The state pension toolkit, which includes a number of state pension fact sheets, has also been updated.

DWP announces extra support for partners of armed forces personnel

On 7 April 2016, the DWP announced that it would provide extra support for armed forces spouses and civil partners to help protect their state pension.

Up to 20,000 armed forces spouses may be eligible for a new NI credit if they have previously joined their partners on an overseas posting, and been unable to work and make NICs as a result while abroad. Guidance on the subject was issued on the same date.

Automation in financial advice

On 4 April 2016, the European Banking Authority published the responses it had received to the December 2015 Discussion Paper published by the European Supervisory Authorities (which consist of the EBA, ESMA and EIOPA), on automation in financial advice. TPAS and the SPP both submitted responses, alongside EIOPA’s Occupational Pensions Stakeholder Group.

The Joint Committee of the European Supervisory Authorities stated that it would assess the feedback received “in order to better understand the phenomenon” of the continued increase in the digitalisation of financial services and decide what, if any, regulatory and/or supervisory action is required. In the pensions sphere, digitalisation has included online independent financial advisory services that use algorithms to select pension investments for savers, theoretically matching funds to consumers’ investment needs and risk appetite.

EIOPA makes statement on internet sales of insurance and pension products

On 4 April 2016, EIOPA published a feedback statement on sales via the internet of insurance and pension products.

Back in January 2015, EIOPA published an Opinion on the subject, requesting national competent authorities (“NCAs”) to report on how they collect information on online distribution activities, and how they identify challenges and address issues with newly established online distribution channels at national level.

EIOPA’s feedback statement notes that it received input from the vast majority of its NCAs, showing that they are seeking to be vigilant regarding the sale of insurance products over the internet. Most jurisdictions have so far tended to structure their supervisory measures to apply to all distribution channels, rather than to specifically target online sales of insurance and pension products.

EIOPA will continue to monitor new and existing financial activities, including work on automation in financial advice (see above).

FCA publishes Retirement Income Market Data: October – December 2015

On 4 April 2016, the FCA published its second Retirement Income Market Data report showing how consumers accessed their pensions from the beginning of October to the end of December 2015. The reports collect data from retirement income providers in order to track and monitor changes in the market.

The data collected covers the following topics:

• choices made by consumers accessing their pensions
• the level of GARs taken up
• levels of pension withdrawals for customers making a regular partial withdrawal
• the use of regulated advisers
• whether consumers change providers when accessing their pensions
• complaints about pension and retirement income products

The report also corrects and updates material included in the first report, for the period from July to September 2015.

In the October to December 2015 period, 127,094 pensions were accessed by consumers for the first time, either to take an income or withdraw their money as cash, a decrease of 36% on the previous quarter. 63% of GARs were not taken up (when pensions with GAR options were accessed) during this period.

FCA publishes Business Plan 2016/17

On 5 April 2016, the FCA published its Business Plan for 2016/17. The Business Plan demonstrates how the FCA how will look to use its resources to meet evolving challenges, and identifies its priorities for the year ahead. Pensions are identified as a priority area, “given the fundamental recent changes to the market”. The FCA states that it will look across the sector to ensure its policies support fair treatment of customers, encourage competition, and disrupt scams. To support these aims, the FCA states that it:

• expects to launch a review on retirement outcomes in 2016/17
• will develop and consult on proposals to discharge its duty of imposing a cap on early exit charges
• will publish a policy statement in Q2 this year, which will summarise responses to its consultation on requirements related to pensions and retirement income. Alongside this it will publish the final rules and guidance
• will work with HMT, among others, to create a consumer protection model for the secondary annuities market
• will undertake a review of the effectiveness of IGCs
• will continue to run the “ScamSmart” campaign to educate and empower consumers to actively avoid scams.

FCA publishes fees and levies rates proposals for consultation

The FCA has published its Regulated fees and levies: Rates proposals 2016/17 for consultation.

Amongst other things, the consultation paper notes that the funding of Pension Wise by the industry will decrease 42% from the £39.1m 2015/16 funding requirement. Any comments on the proposed 2016/17 pensions guidance levy rates should be submitted to the FCA by 27 May 2016.

HMRC publishes pensions taxation materials

HMRC has published a suite of documents, forms and guidance for scheme administrators, following the introduction of the new state pension, the abolition of defined benefit contracting-out, and pensions tax changes made at 6 April 2016.

The new and updated documents sit within the Income Tax forms collection (for example, in relation to repayment claims on flexibly accessed pensions and on death benefit lump sums), Self Assessment forms and helpsheets collection (for example, helpsheets on tax charges on excess over the LTA and AA), pension scheme forms (for example, relief at source claims), and the pension administrators section (for example, reporting requirements, and information that must be given to members).

HMRC issues latest “Countdown bulletin” on the abolition of DB contracting-out

On 5 April 2016, HMRC published issue 15 of its contracting out Countdown Bulletin, which provides further guidance for pension scheme administrators in relation to the end of contracting-out on that date.

This additional bulletin provides information about the new GMP Checker (formerly the GMP Micro-Service). The GMP Checker will be available to all pension scheme administrators to obtain GMP calculations, contributions and earnings information in respect of individual members of their scheme.

HMRC Pension Schemes Newsletter 77

HMRC published Pension Schemes Newsletter 77, on 29 March 2016. An update to this newsletter was published on 6 April 2016, amending an example in Appendix 1 in relation to FP16 information for scheme members.

HMT issues guidance on the indexation of public service pensions

HMT published updated guidance on 7 April 2016 in relation to the indexation of public service pensions, including the updated direction on indexation of GMPs announced on 1 March 2016.

The guidance comprises a note on the operation of pensions increase legislation for public service pension schemes. It also includes a Treasury direction (at Appendix E) under section 59A of the Social Security Pensions Act 1975, which will override the requirement for a reduction in the amount of an individual’s public service pension in certain circumstances. The direction serves to protect pensioners who otherwise would not receive full increases on their GMP.

PPI issues analysis of the impact of the new state pension

The PPI issued a press release on 5 April 2016, setting out its analysis of the impact of the new state pension. According to its findings, three quarters of people in their twenties (approximately 6.3 million people) are set to lose a notional average of £19,000 over the course of their retirement, whilst those who will make a notational gain (approximately 2.1m) are expected to be £10,000 better off on average.

PPI issues Briefing Note 80

The PPI released its latest Briefing Note (80) relating to IGCs, on 11 April 2016.

This Briefing Note provides a background to the development of IGCs and looks at the key themes emerging from their first twelve months of operation and what they expect may emerge during their second year.