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

• Government consults on regulations establishing Lifetime ISA
• FCA data reveals decline in consumers taking advice when purchasing pension products
• FCA “Mission” published for consultation
• Flexible Payments from Pensions: October 2016
• House of Lords Library Briefing on Pension Schemes Bill
• LGPS statistics 2015-16 published
• Pensions Institute publishes discussion paper
• PLSA publishes new “Made Simple” guides
• TPR fines more trustees for failure to provide scheme returns
• TPR uses threat of avoidance powers to protect member benefits
• TPR issues automatic enrolment compliance warning

Government consults on regulations establishing Lifetime ISA

On 27 October 2016, HMRC and HMT published the draft Individual Savings Account (Amendment No XX) Regulations 2017 for consultation, alongside their explanatory memorandum.

The regulations amend the Individual Savings Account (ISA) Regulations to establish the Lifetime ISA, and include rules in relation to the Government bonus payable on Lifetime ISA savings and withdrawals from accounts. The draft regulations will also increase the overall ISA limit from £15,240 to £20,000 from 6 April 2017.

It is intended that these regulations will come into force from 6 April 2017. Consultation on the regulations closes on 6 January 2017.

FCA data reveals decline in consumers taking advice when purchasing pension products

The FCA’s latest Data Bulletin (Issue 7) includes a summary of trends in the retirement income market.

The FCA’s data shows a decrease in the percentage of customers taking regulated advice when drawing retirement income.  It also shows that, while there had been little material change in the overall number of retirement savings being accessed between Q4 of 2015 and Q1 2016, there had a been a 12% decrease in retirement savings accessed as annuities, with more drawdown policies being taken. The Bulletin also notes that over 60% of pensions with guaranteed annuity rates (“GARs”) are still not being taken up.

FCA “Mission” published for consultation

On 26 October 2016, the FCA launched a consultation on its “future Mission”. The document is intended to “create a clear understanding of the FCA’s remit and ensure that it is well communicated and understood”, providing a set of guiding principles around its strategy.

Views on the questions raised in the document should be submitted by 26 January 2017.

Flexible Payments from Pensions: October 2016

HMRC published updated statistics on 26 October 2016, in relation to the number and value of flexible payments made from pensions since April 2015.

The figures show that 1.1 million payments have been made since the pension freedoms were launched, with 158,000 people accessing £1.54 billion flexibly from their pension pots over the last 3 months. This brings the total amount of money withdrawn from pensions to £7.65 billion since April 2015.

House of Lords Library Briefing on Pension Schemes Bill

The House of Lords Library published a briefing on 26 October 2016, in relation to the Pension Schemes Bill, which was introduced in the House of Lords on 19 October 2016. The briefing provides an overview of the policy background to the Bill and outlines a number of its clauses.

The Bill is due to have its second reading in the House of Lords on 1 November 2016.

LGPS statistics 2015-16 published

The DCLG published a statistical release relating to LGPS funds in England and Wales in 2015-16 on 26 October 2016.

Key statistics revealed in the report show that, in 2015-16:

• total LGPS expenditure in England was £10.0 billion and £758m in Wales, representing increases of 6.1% and 8.2% respectively on the 2014-15 figures
• in England, total LGPS income was 12.4 billion – down 1.4% on a like-for-like basis
• the market value of LGPS funds in England at the end of March 2016 was just over £200 billion
• the scheme encompasses more than 5.06 million people, of whom 1.8 million are employees still contributing to the scheme, 1.5 million are pensioners and 1.8 million are deferred members.

Pensions Institute publishes discussion paper

The Pensions Institute at Cass Business School has published discussion paper PI-1607, “The Cost and Value of Defined Benefit Pension Schemes, and the Implications for Defined Contribution Pension Provision”.

The paper looks at how the cost of pensions has changed relative to the cost of non-pensions earnings. It also examines the main components of the change in pensions cost – those relating to benefits payable, discount rates and longevity – to analyse their relative importance.

PLSA publishes new “Made Simple” guides

On 26 October 2016, the PLSA published three new guides in their “Made Simple” series.

The three publications, Generating Income from Private Markets, Exchange Traded Funds (ETFs) and Low Volatility Investing provide an introduction to these areas of investment and pensions management.

Joanne Segars, Chief Executive of the PLSA, commented: “At a time when pension schemes face increasing deficits and low returns our new Made Simple Guides offer straight-forward explanations on investment options which may help navigate the current low return environment – helping them to get the best return for their scheme.”

TPR fines more trustees for failure to provide scheme returns

On 25 October 2016, TPR issued a press release repeating its warning to trustees of DC schemes to comply with pensions law or face a fine.

It confirmed that it had issued fines to New Station Bodyworks Ltd Retirement Benefit Scheme and M Holleran Ltd Pension Plan for failing to provide a scheme return, and published a regulatory intervention report on the action taken against the schemes.

The current number of warning notices issued for the failure to submit a scheme return by the due date stands at 23.

TPR uses threat of avoidance powers to protect member benefits

TPR confirmed on 26 October 2016 that it had used its powers as a deterrent to ensure members of a DB scheme would receive their full benefits, following the sale of the sponsoring business.

TPR believed the sale of data management services provider Database Group Ltd would have led to an insecure future for the scheme. It issued a regulatory intervention report highlighting how clearance was granted for an amended deal.

Nicola Parish, Executive Director for Frontline Regulation at TPR, said: “By being approached for clearance we were able to have a seat at discussions and ensure a better outcome for scheme members.

“We had concerns about the risk posed by effectively removing support from the scheme, but understood the commercial rationale and wider benefits of the acquisition. We opened an investigation and ensured that, through our involvement, members got a better deal.

“This case demonstrates that TPR will consider using anti-avoidance powers in respect of a smaller scheme where appropriate. It illustrates how the existence of these powers can act as a deterrent against possible avoidance activity.”

TPR issues automatic enrolment compliance warning

On 27 October 2016, TPR issued a reminder to employers that workplace pensions law applies to everyone with staff.

The warning follows the publication of TPR’s latest quarterly compliance and enforcement bulletin which shows that, as expected, the number of penalties it issues has continued to rise, with the increase in employers reaching their automatic enrolment compliance deadlines. However, while the number of Compliance Notices issued has risen to more than 26,000, fewer than 5% of these progressed to an escalating penalty.

The report also highlights that explanations given for non-compliance such as illness, being short-staffed, or confusion between employers and their advisers, are not a “reasonable excuse”.