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

• Budget 2016
• Income Tax (Pay As You Earn) (Amendment) Regulations 2016
• The Social Security (Contributions) (Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2016
• The Social Security (Contributions) (Amendment) (No. 2) Regulations 2016
• DWP publishes materials on new state pension
• FRC publishes results of transfers review
• PLSA releases two new “Made Simple” Guides
• Work and Pensions Select Committee proposal for women affected by increase in state pension age
• New Secretary of State for Work and Pensions

Budget 2016

George Osborne, the Chancellor of the Exchequer, delivered his Budget on 16 March 2016. As expected, no changes to pensions tax relief were made.

The key announcements in relation to pensions were as follows:

• From April 2017, it will be possible for those between the ages of 18 and 40 to open a “Lifetime ISA account”.
• Aiming to give individuals the ability to view all their retirement savings in one place, the Government will “ensure the industry designs, funds and launches” a “Pensions Dashboard” by 2019.
• The Government will consult on introducing a “Pensions Advice Allowance” to allow people under the age of 55 to withdraw up to £500 tax free from their DC pension to redeem against the cost of financial advice.
• The first of a package of measures to “ensure those who have used disguised remuneration tax avoidance schemes pay their fair share of tax and NICs will be included in the Finance Bill 2016 (“the FB16”).
• The FB16 will also introduce a number of minor changes to the pensions tax rules, with the aim of ensuring that they operate as intended following the introduction of pension flexibility in 2015.
• While the Government may yet limit the range of benefits which can attract income tax and NICs advantages when they are provided as part of salary sacrifice schemes, it currently intends to allow pension savings, childcare and health-related benefits such as Cycle to Work to continue to benefit from the reliefs such arrangements provide.
• The discount rate used to set employer contributions to the unfunded public service pension schemes has been reviewed, and set at 2.8%, meaning that employers will pay higher contributions to the schemes from 2019/20 as a result. A briefing paper on this issue was subsequently published by the House of Commons Library on 18 March 2016.
• The Government announced that it would support proposals by local administering authorities to establish both a small number of British Wealth Funds by combining LGPS assets into much larger investment pools by 2018, and a national Local Government infrastructure investment platform.

Following the Budget, GAD published a technical bulletin setting out an overview of some of the measures announced, relating to savings, pensions and National Insurance.

For full details, please see our Alert.

Income Tax (Pay As You Earn) (Amendment) Regulations 2016

The Income Tax (Pay As You Earn) (Amendment) Regulations 2016 were laid before the Commons on 11 March 2016, and come into force on 6 April 2016.

The regulations make changes to The Income Tax (Pay As You Earn) Regulations 2003, as a consequence of the introduction of the retirement flexibilities and the changes in the taxation of lump sum death benefits following the changes made in Finance (No. 2) Act 2015 (see our Alert for full details).  The changes require pension providers to indicate in their real time information (RTI) returns to HMRC whether the payment they are making includes a payment of a certain type.

Providers must report the following payments to HMRC:

• a flexible access payment under a DC arrangement including an UFPLS, a flexible lifetime annuity, a withdrawal from a member’s FADF, and a payment of scheme pension from a money purchase arrangement where there are fewer than 12 members. This will help HMRC know that the money purchase AA applies in the case of the individual
• lump sum death benefit payments made to an individual where the member died after the age of 75. Currently, these are usually subject to a 45% special lump sum death benefits charge, but from 6 April 2016 they will generally be taxed at the individual’s marginal rate. This information will enable HMRC to monitor the impact of the changes to the taxation of lump sum death benefits.

For more on the new RTI reporting requirements, see HMRC’s Pension Schemes Newsletter 72 (published in September 2015).

Minor amendments have also been included since the draft stage in relation the electronic submission of certain documents to HMRC, in response to requests during the consultation.

The Social Security (Contributions) (Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2016

The Social Security (Contributions) (Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2016 were laid before Parliament on 14 March 2016 and will come into force on 6 April 2016. The regulations set the earnings limits and thresholds for NICs for 2016/17.

The Social Security (Contributions) (Amendment) (No. 2) Regulations 2016

The Social Security (Contributions) (Amendment) (No. 2) Regulations 2016 were laid before Parliament on 14 March 2016, and will come into force on 6 April 2016. Among other things, the regulations make consequential amendments to the Social Security (Contributions) Regulations 2001 arising from the abolition of DB contracting-out from 6 April 2016.

DWP publishes materials on new state pension

On 16 March 2016, the DWP published further resources for stakeholders and employers to help them answer questions about the new state pension, which is being introduced for people reaching SPA on or after 6 April 2016.

FRC publishes results of transfers review

On 21 March 2016, the FRC published the results of the Joint Forum on Actuarial Regulation’s (JFAR) review into transfers from DB to DC schemes. The review sought the views of scheme actuaries and other pensions professionals and was undertaken to help JFAR understand the impact of pensions freedoms introduced in April 2015 on actuarial work and regulation.

The review found that, whilst there had been an increase in DB transfer quote requests since 6 April 2015 and a small increase in actual transfers, overall the numbers remain low. Among the reasons given, this was found to be due in part to the nature of the transfer process, including the availability of products and providers able to accept transfers, and the value that DB scheme members place on their benefits.

PLSA releases two new “Made Simple” Guides

The PLSA launched two further Guides in its “Made Simple” series on 10 March 2016, at its annual investment conference. The first of the new Guides covers Multi-Asset Credit, and is designed to help pension funds address concerns that they have around accessing global credit markets. The second, on Systematic Investing, explains how it works, how it has performed historically, and what pension schemes’ considerations should be in relation to such funds.

Work and Pensions Select Committee proposal for women affected by increase in state pension age

On 15 March 2016, the Work and Pensions Select Committee published its Seventh Report of Session, “Communication of state pension age changes”, as part of its inquiry into state pension reform.

The interim report considers alleged failures and shortcomings in the communication of those changes, and the impact both of this and of later access to pensions, especially on women born in the 1950s. One suggestion the report makes is that the Government contemplate offering women who were given relatively short notice of increases in state pension age the option to retire earlier, with a slightly reduced pension. The proposal would apply to thousands of women born in the 1950s.

It is intended that the scale of reduction would be calculated to ensure that there would be no additional costs to the exchequer over the lifetime of those involved. An inquiry to explore the possible effects of such a policy was launched on 18 March 2016. The deadline for written submissions is Sunday 10 April 2016.

New Secretary of State for Work and Pensions

Following the resignation of Iain Duncan Smith, Stephen Crabb was appointed as the new Secretary of State for Work and Pensions on 19 March 2016.