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:

Increasing State Pension benefits
FCA publishes instrument regulating advice on conversion or transfer of pension benefits
IFoA and MRSC publish Mortality Data Directory
PPI issues briefing note on DC default funds and investment governance
PRA confirms 100% protection for annuity holders
High Court: The Cabinet Office v Annette Ellis
Pensions Ombudsman: Mrs Maureen Bone – Friends Life Personal Pension Plan

Increasing State Pension benefits

Individuals who reached State Pension age between 6 April 2010 and 5 April 2015, or between 6 April 2009 and 5 April 2010, but who are not receiving or expecting to receive a full basic State Pension, may be able to improve the amount they receive by paying up to six additional years of voluntary Class 3 National Insurance contributions (“voluntary contributions”) for years going back to 1975.

To assist individuals born between:

the DWP has published two new guides on the available options.

The DWP notes that paying voluntary contributions is not right for everyone, as it will depend on an individual’s personal circumstances. The guides explain where individuals can go for further information and advice.

FCA publishes instrument regulating advice on conversion or transfer of pension benefits

On 7 April 2015, the FCA published FCA 2015/22 – Compulsory Jurisdiction Rules (Advising on Conversion or Transfer of Pension Benefits) Instrument.

This instrument amends The Dispute Resolution: Complaints Sourcebook (DISP) to bring the newly regulated activity of advising on the conversion or transfer of “safeguarded” pension benefits into flexible benefits (DC) within the scope of Financial Ombudsman Service’s (FOS) compulsory jurisdiction.

This activity became regulated on 6 April 2015, in line with the introduction of the new DC flexibilities – see 7 Days on 23 March 2015 for details of the new regulated activity.

IFoA and MRSC publish Mortality Data Directory

The IFoA, together with the Mortality Research Steering Committee (MRSC), has published a Mortality Data Directory. The directory lists free and commercial datasets that are available in the area of mortality.

The data sets include UK, Republic of Ireland, EU and international data sets. It is hoped that greater access to and awareness of the various data sets will enable accurate modelling of information, allowing actuaries to make informed decisions regarding longevity and mortality in relation to life assurance, pensions and long-term care products.

PPI issues briefing note on DC default funds and investment governance

The PPI has published Briefing Note 73 on “Defined Contribution default funds and investment governance”.

The Briefing Note looks at some of the issues surrounding the investment governance of DC pension schemes and, in particular, considers how new tools, such as DC strategy benchmarks, might be used to improve standards of governance.

PRA confirms 100% protection for annuity holders

The PRA published Policy Statement PS5/15 on 1 April 2015. In this statement, the PRA sets out proposed amendments to its rulebook which are intended to align the existing insurance compensation rules more closely with the PRA’s statutory objectives, and contribute to the future operational effectiveness of the FSCS in providing continuity of cover, payment of benefits falling due and compensation in the event of the failure of an insurance firm.

Among other things, the new rules agreed following consultation include the extension of compensation to all long-term insurance products (including annuities, pensions and life assurance) from 90% to 100% of the outstanding value of the policy, in the event that the insurance provider becomes insolvent.

The new policyholder protection rules and statement of policy are due to take effect on and from 3 July 2015.

High Court: The Cabinet Office v Annette Ellis

The Court of Appeal has overturned a decision of the High Court, finding that:

the High Court judge had misinterpreted provisions of the Principal Civil Service Pension Scheme (PCSPS) and that
the Pensions Ombudsman (PO) had not taken into account irrelevant factors in making its decision.

The Court of Appeal concluded that the Cabinet Office’s appeal should be allowed. It found that Ms Ellis was no longer entitled to retire at age 55 without a reduction being applied to her pension, nor to benefits calculated on a favourable basis for long service.

Please click here to read the full summary.

Pensions Ombudsman: Mrs Maureen Bone – Friends Life Personal Pension Plan

On 7 April 2015, the PO published his determination in a complaint by Mrs Maureen Bone against Friends Life.

Mrs Bone had complained that the transfer value of her pension plan was lower than the value Friends Life had originally quoted. The complaint was upheld against Friends Life because the PO determined that, in the circumstances, Friends Life was contractually obliged to Mrs Bone to honour the incorrect valuation.

Friends Life had overstated the value of Mrs Bone’s funds, following their failure to make an investment switch correctly. Friends Life argued that Mrs Bone was not entitled to the proceeds of a mistake, but only to her correct benefits. The PO agreed that in principle, a mistake does not entitle a member to erroneously-quoted benefits. However, in this case, the PO noted that Friends Life had entered into an agreement with the member by means of a telephone conversation in which they had promised to transfer the higher amount in return for the member dropping her complaint. This conversation was held to constitute a binding contract to settle the complaint at this level.

The PO directed Friends Life to pay both the higher benefit and £100 in relation to the inconvenience and delays suffered.