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

What next for UK pensions after Brexit?
FCA policy statement on regulated fees and levies for 2016/17
FOS focus on pensions freedoms
Final text of revised IORP directive published
HMRC issues latest “Countdown bulletin” on the abolition of DB contracting-out
HMRC publishes Pension Schemes Newsletter 79
House of Commons Library briefing papers
NAO report into public sector pension liabilities
New NEST trustees appointed
Consultation launched on new Diploma in Pension Trusteeship
PPF appointments
PPI publishes updated Pensions Primer
TPR issues first fine for non-compliance with annual statement requirements
Hinton v Wotherspoon
Heis v MF Global UK Services Limited (in administration)

What next for UK pensions after Brexit?

On 23 June 2016, the UK voted to leave the EU by 52% to 48%. Whilst Britain, the EU and the rest of the world come to terms with what this might mean going forwards, in our recent Alert we look at some of the questions now facing trustees and employers of UK pension schemes.

The House of Commons Library published a briefing paper on 24 June 2016, which brings together some initial responses regarding the possible implications for pensions of the UK’s vote to leave the EU.

FCA policy statement on regulated fees and levies for 2016/17

On 30 June 2016, the FCA published PS16/16 – a policy statement on regulated fees and levies for 2016/17, including feedback the outcome of the consultation launched in April. The rules cover fees and levies rules affecting the FCA, pensions guidance, the FOS and MAS. Final fees and levy rates rules take effect after 1 July 2016, when new invoices are issued to firms.

The report confirms that the final funding requirement for Pension Wise in 2016/17 will be £22.5m, down by 42% from the 2015/16 level. The funding requirement was reduced in part due to an underspend of £7.3m in 2015/16.

FOS focus on pensions freedoms

On 28 June 2016, the Financial Ombudsman Service (“FOS”) published its latest newsletter. The newsletter includes a ‘focus’ section, detailing the FOS’ perspective on the pension freedoms and the types of complaints received over the previous twelve months.

Final text of revised IORP directive published

On 30 June 2016, the European Parliament, the Council and the Commission agreed the final text of the second Pensions Directive (“IORP II”). IORP II revises and recasts Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision.

IORP II will come into force 20 days after its publication in the Official Journal of the EU (expected later in the year) and Member States will have two years to implement its provisions in national legislation. This means that the timetable for implementation will run largely in parallel to the UK’s Brexit negotiations. Ultimately, the extent to which IORP II will apply to UK pension schemes will depend on the exit terms agreed between the UK and the EU.

HMRC issues latest “Countdown bulletin” on the abolition of DB contracting-out

On 28 June 2016, HMRC published issue 18 of its contracting out Countdown Bulletin, which provides guidance for pension scheme administrators in relation to the end of contracting-out as of 6 April 2016.

Among other things, the bulletin gives information on termination and transfer notices, GMP calculations, the Scheme Reconciliation Service and scheme cessation.

HMRC publishes Pension Schemes Newsletter 79

HMRC published Pension Schemes Newsletter 79 on 27 June 2016. Among other things, it includes information on flexibility, the lifetime allowance, annual allowance reportable events and “Scheme Pays”, and scheme transfers.

The Newsletter also notes that Royal Assent to the Finance Bill 2016 will be later this year than usual (in recent years, Finance Bills have received Royal Assent in the July after their publication), as its Public Bill Committee consideration is only due to conclude on 14 July 2016, and the Houses of Lords and Commons both rise for the summer on 21 July 2016. There is no timetable as yet for when Royal Assent can be expected.

House of Commons Library briefing papers

The House of Commons Library published a briefing paper on 28 June 2016, looking at the requirements on private sector DB occupational pension schemes to index and revalue pension benefits and the current consultation on the British Steel Pension Scheme.

Three further Briefing Papers were published the same week, on:

provisions for inheriting additional State Pension following the introduction of the new State Pension in April 2016
reductions in inherited SERPS, and
the arrangements made for mineworkers’ pensions following privatisation of British Coal in 1994.

NAO report into public sector pension liabilities

According to a report published by the National Audit Office (“NAO”) on 30 June 2016, the Government’s public sector pension liability has increased by around third in five years. It is now the single largest liability on the government’s “Whole of Government Accounts” balance sheet, with the net liability for 2014/15 standing at £1,493 billion – equivalent to 81% of GDP, or £55,000 per UK household. It is, however, noted that this is a long-term liability which will be payable over a significant number of years.

New NEST trustees appointed

On 1 July 2016, NEST and the DWP jointly announced that two new trustees had been appointed to NEST with effect from that date: Tomas Carruthers, the Chief Executive for the Social Stock Exchange and Ron Jarman, from Proxima’s Consulting practice. The new trustees will replace outgoing trustees Nigel Stanley and Sharon Darcy, who have served on the board since June 2011.

Consultation launched on new Diploma in Pension Trusteeship

The Association of Professional Pension Trustees (APPT) Council and the PMI announced on 27 June 2016 a joint consultation on the introduction of a Diploma in Pension Trusteeship. The aim of the diploma is to help trustees to understand and demonstrate the demands and challenges of their role and “21st Century Trusteeship”.

The consultation was welcomed by TPR, with Andrew Warwick Thompson, Executive Director for Regulatory Policy, saying: “We expect higher standards of professional trustees and this qualification would help professional trustees demonstrate their knowledge and commitment. Effective trustee boards form the backbone of a healthy pension system where the board as a whole has sufficient knowledge and skills to manage schemes effectively.”

PPF appointments

On 30 June 2016, the PPF announced the appointment of Arnold Wagner OBE as its new chairman, succeeding Lady Judge. He was appointed a Non-Executive Director of the PPF in 2011 and is currently Senior Independent Director and Chair of the Remuneration Committee.

On the same day, it was announced that Jayne Nickalls had been appointed as a Non-Executive Director of the PPF. Among other roles, Jayne Nickalls is currently a Non-Executive Director at the FSCS.

PPI publishes updated Pensions Primer

The PPI published an updated version of its Pensions Primer on 1 July 2016.

The Primer gives a detailed description of the current pensions system and “some of the archaeology” of its various layers. It is intended for people wanting to learn about UK pensions policy.

This latest version reflects the current position of, and legislated future changes to, the UK pension system as at June 2016.

TPR issues first fine for non-compliance with annual statement requirements

On 29 June 2016, TPR published a press release warning trustees of DC schemes that they will be fined up to £2,000 if they fail to meet the new statutory requirement to prepare an annual governance statement signed by the chair of trustees.

The warning comes as TPR published a report on the first fine imposed on a trustee of a DC scheme for failing to meet this requirement. The trustee of Abbey Manor Group Pension Scheme received the minimum mandatory £500 fine after the trustee promptly complied with their legal duty to notify TPR of the breach, and took action to prepare the required statement.

Andrew Warwick-Thompson, Executive Director for Regulatory Policy at TPR, said: “This case demonstrates that we must comply with the law and must impose a penalty where trustees fail to prepare an annual governance statement signed by the chair of trustees […]. A fine of up to £2,000 could be imposed for such a breach […] and we hope that our report will act as a reminder and a deterrent for other schemes”.

Hinton v Wotherspoon

In this High Court decision, the judge commented that an individual who had entered drawdown and elected to receive an income from that drawdown fund is “entitled” to the income from it. As such, the income can be subject to an “Income Payments Order” from a trustee in bankruptcy. In contrast, “if an election has not been made, the mere existence of a drawdown fund, whether invested or in cash, is not enough to establish an “entitlement”.

Please see our case report for further details.

Heis v MF Global UK Services Limited (in administration)

In this appeal by the administrators of MF Global UK Limited, the court considered whether

there was an implied contract between two companies
if such a contract existed (as the High Court held it did), that contract included an obligation on the operating company, which actually used the services of the staff, to indemnify the service company in respect of its obligations under section 75 of the Pensions Act 1995 (employer debt).