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:

• Abolition of ‘short service refunds’ in occupational DC arrangements from 2015
• DWP publishes information note on DA and collective benefits
• ACA publishes smaller firms’ pension survey
• UK/Netherlands Double Taxation Convention – Competent Authority Agreement
• HMRC publishes guidance on using its online service for scheme administrators and practitioners
• HMRC publishes updated guidance on the changes to pension tax rules
• HMRC publishes issue 3 of its Countdown bulletin (end of DB contracting-out)
• TPR announces settlement reached for MG Rover Group senior pension scheme
• TPAS factsheet on Budget 2014 changes

Abolition of ‘short service refunds’ in occupational DC arrangements from 2015

Under current arrangements, a member of an occupational pension scheme who leaves having completed more than 3 months but less than 2 years’ qualifying service may be entitled to a short service refund. DC occupational pension schemes currently make around 20,000 short service refunds every year, a figure which was forecast to grow with the continuing roll-out of automatic enrolment.

The government intends to abolish such refunds.  In doing so, its aim is to ensure that money saved into a pension scheme stays there and is invested for its intended purpose – adding to an individual’s overall retirement savings.  The move also lays the groundwork for wider government plans to make workplace pension saving easier, by introducing automatic transfer arrangements for people who change employer during the course of their career (please see our Alert for further details).

Subject to finalising the necessary legislation, from October 2015, occupational DC schemes will only be able to make refunds within the first 30 days of membership.

DWP publishes information note on DA and collective benefits

The main purpose of the Pension Schemes Bill (see our Alert for details) is to introduce a legislative framework for DA schemes, in particular Collective DC. The DWP has published a set of notes on the Bill which provide further details on its provisions.

ACA publishes smaller firms’ pension survey

On 23 October 2014, the ACA published its survey on pension trends in smaller firms (those with 249 or fewer employees).  Key findings include:

• In excess of nine out of ten employers who have not yet reached their staging date (the date by which they must auto-enrol their eligible employees into a workplace pension) want the process delayed until pending legislation and regulation on greater pension flexibility, new pension options and charges have been finalised
• 62% of employers with ten or more employees are now clear about when they must auto-enrol eligible employees into a workplace pension, but only 46% of those with 9 or fewer employees have identified the date
• Close to six out of ten smaller employers are supportive of the new “freedom and choice” reforms, with just one in ten opposed
• Where employers have formed a view, “face to face” meetings are seen as likely to be the most popular channel for the guidance guarantee, followed by web based tools and then telephone guidance
• 56% of employers support further changes to current levels of pensions tax relief so that they are more targeted on those with lower incomes, with over a third also saying that there should be further restrictions on relief for those on higher incomes.

UK/Netherlands Double Taxation Convention – Competent Authority Agreement

The UK and the Netherlands have reached an agreement on the application of a Convention to avoid double taxation. This Agreement applies to UK Common Investment Funds (CIFs) whose investors are:

• pension schemes which qualify for benefits under the above Convention
• charity organisations which qualify for benefits under the above Convention
• other investors which qualify for benefits under a Convention for the avoidance of double taxation to which the Netherlands is a Contracting State.

Under the Agreement, a CIF which is established in the UK and which receives income and gains from the Netherlands may itself (represented by its custodian, manager or depository) claim the benefit of the UK / Netherlands double tax convention on behalf of a UK pension scheme and charity investors in the CIF.

HMRC publishes guidance on using its online service for scheme administrators and practitioners

HMRC has published guidance on how to use the Pension Schemes Online service.  The guidance, which is regularly updated and maintained by HMRC, provides step-by-step instructions.

HMRC publishes updated guidance on the changes to pension tax rules

Following changes made to the Taxation of Pensions Bill (for details please see our Alert), on 21 October 2014 HMRC published a revised version of its guidance on the changes to be made to the pensions tax legislation to give individuals greater flexibility over how they access their DC pension savings.

HMRC publishes issue 3 of its Countdown bulletin (end of DB contracting-out)

A key consequence of the move to a single tier State pension on and from 6 April 2016 is that DB contracting-out will be abolished from the same date (see our Alert for details).

On 22 October 2014, HMRC published Issue 3 of its Countdown Bulletin.  It includes information about the Scheme Reconciliation Service and provides responses to a number of issues regarding the service.

TPR announces settlement reached for MG Rover Group senior pension scheme

On 23 October 2014, TPR announced that an £8m settlement had been reached following its investigation into the MG Rover Group senior pension scheme.

In December 2012, TPR issued a warning notice to MGR Capital Limited (Capital) indicating its intention to issue a financial support direction (FSD). Following representations from Capital in response to the warning notice, an agreement was reached between the trustee of the scheme and Capital, in which Capital agreed to pay £8.085m into the scheme. This sum is expected to allow the scheme to wind up outside the PPF and to enable its members to receive benefits above PPF levels.

In light of this agreement, TPR is no longer seeking to issue an FSD against Capital.  Details of the case and the settlement have been published in a section 89 report by TPR.

TPAS factsheet on Budget 2014 changes

TPAS has published a factsheet on the changes announced in the Budget 2014. As well as considering the changes which took effect from 27 March 2014, the factsheet looks ahead to the payment flexibilities being proposed for DC arrangements from April 2015.

TPAS will be one of the independent organisations entrusted with delivering the guidance guarantee in support of the new flexibilities.