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

• Insurance Act 2015 comes into force
• HMRC consultation on restricting salary sacrifice
• Briefing paper on Brexit implications for pensions updated
• NEST publishes first responsible investment report
• PPF publishes eighth issue of its Technical News series
• Ms P v NHS Business Services Authority (Pensions Ombudsman)

Insurance Act 2015 comes into force

The Insurance Act 2015 (“the Act”) came into force on 12 August 2016 and applies to all contracts of insurance, reinsurance and retrocession, as well as variations to existing contracts made after that date.

Broadly, the Act increases the burden on insureds to disclose to the insurer matters which might affect the insurance.  The insured must make to the insurer a “fair presentation of the risk”.

A fair presentation of the risk is one:

• which discloses every material circumstance which the insured knows or ought to know or, gives the insurer sufficient information to put a prudent insurer on notice that it needs to make further enquiries for the purpose of revealing those material circumstances
• which makes that disclosure in a manner which would be reasonably clear and accessible to a prudent insurer
• in which every material representation as to a matter of fact is substantially correct and every material representation as to a matter of expectation or belief is made in good faith.  (A circumstance or representation is material if it would influence the judgement of a prudent insurer in determining whether to take the risk and, if so, on what terms.)

The question to be asked is what the senior management (ie the board of directors and any individuals who play significant roles in the making of decisions about how the insured’s activities are to be managed or organised) know or ought to know, had they carried out a reasonable search for information.  What is reasonable will depend on the size, nature and complexity of the business.

Pension scheme trustees should therefore consider whether any application for insurance is accurate, and whether they know of any additional matters which ought to be disclosed.

It will be possible for an insurer to avoid a policy and keep the premium only where the misrepresentation or non-disclosure was deliberate or reckless (and it will be up to the insurer to demonstrate this).

HMRC consultation on restricting salary sacrifice

On 10 August 2016, HMRC published a consultation on proposals to limit the range of employee benefits in kind that attract Income Tax and NICs advantages, when provided as part of salary sacrifice arrangements. This follows the 2016 Budget, when the Government announced it would consider restricting the range of such benefits.

The purpose of the consultation is to explore potential impacts on employers and employees, should the Government decide to change the way the benefits code applies when a benefit in kind is provided in conjunction with a salary sacrifice or flexible benefit scheme.

The consultation document confirms that employer pension contributions, employer-provided pension advice, employer-supported childcare and provision of workplace nurseries and cycles and cyclist’s safety equipment provided under the cycle to work scheme will remain unaffected by the proposed measures. These are benefits that the Government specifically wants to encourage employers to provide.

Responses are sought by 19 October 2016.

Briefing paper on Brexit implications for pensions updated

On 10 August 2016 the House of Commons Library released an updated edition of the paper “Brexit – implications for pensions”.

Originally published on 20 July 2016, it brings together initial responses from relevant organisations, whilst noting that “the implications of Brexit for pensions are as yet unknown”.

NEST publishes first responsible investment report

On 10 August 2016, NEST released its first responsible investment report, “Working for change”. The report sets out how NEST incorporates environmental, social and governance (“ESG”) risk factors when looking after members’ money, to boost and protect their pots.

The report includes case studies setting out how NEST looks to understand and act on a variety of issues that have an impact on long-term returns, sustainable markets and good business practices, such as:

• climate change and managing the transition to a low carbon economy
• banking culture and conduct and how this can impact on performance
• the quality of company audits and the interaction between shareholders and auditors
• the role of pay in company performance.

PPF publishes eighth issue of its Technical News series

On 8 August 2016, the PPF published Issue 8 of its Technical News, a newsletter on topical issues including practical guidance for schemes in PPF assessment periods and FAS qualifying schemes. Issue 8 covers:

• implications of the legislative changes from April 2016 for schemes that enter a PPF assessment period
• revisions to the compensation cap and actuarial factors
• PPF transfers involving members who have taken early retirement due to ill health.

Ms P v NHS Business Services Authority (Pensions Ombudsman)

In this case, a member had complained that her scheme had refused a transfer to an overseas pension scheme.

The PO partially upheld the complaint, finding that there had been maladministration in the scheme administrator providing misleading information.

For full details, please see our case report.