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

• FCA publishes update to its work on DB pension transfers
• HMRC publishes brief on VAT treatment of pension fund management services
• PASA to launch mediation service for administration service transfers
• PPF publishes note on risk appetite
• PPI publishes “The Future Book” third edition
• TPR publishes blog on 21st century trusteeship

FCA publishes update to its work on DB pension transfers

On 3 October 2017, the FCA issued an update to its work on DB pension transfers to assess the advice consumers are receiving from firms and whether they are at risk of harm. Noting that the number of consumers transferring from DB schemes to personal pensions has significantly grown, the FCA has examined how advisory firms have adapted their business models and processes in response to changes in the market since the introduction of the retirement flexibilities in April 2015.

The FCA had concerns regarding the suitability of transfer advice provided to clients:

• in 88 cases where the recommendation was to transfer, the FCA found that 17% were unsuitable, and in a further 36% of cases it was unclear if the recommendation was suitable
• the recommended product and fund were found to be unsuitable in 24% cases, and not clearly suitable in another 40%.

The FCA is concerned that many firms had designed processes and procedures which result in transfers where the suitability of advice could not be established by the firm. This included firms:

• failing to obtain enough information about clients’ needs and personal circumstances
• failing to consider those needs alongside the client’s objectives when making a recommendation
• not making an adequate assessment of the risk a client is willing and able to take in relation to their pension benefits.

In some cases, advisers had failed to make appropriate comparisons between the DB scheme and the intended receiving scheme. Therefore advice was based on incorrect or inaccurate comparisons.

As a result of the FCA’s DB transfers assessments, four firms have chosen to stop advising on DB transfers, with its wider work on scams leading to 32 firms choosing to stop providing advice or deciding to limit their pension transfer activity.

The findings from this work informed the FCA’s proposals in its recent consultation paper on “Advising on Pension Transfers”, and will be taken into account in the FCA’s response to the consultation.

The FCA states that it will continue to monitor this market and, where appropriate, to assess firms who provide advice on DB transfers. It intends to carry out a further phase of supervisory assessments starting in the current business year.

HMRC publishes brief on VAT treatment of pension fund management services

On 5 October 2017, HMRC published a brief which outlines a change to its policy concerning the VAT treatment of pension fund management services provided by regulated insurance companies.

We still await an update on VAT on professional fund management costs paid in respect of occupational pension schemes, with the current transitional period due to run until 31 December 2017.

PASA to launch mediation service for administration service transfers

On 4 October 2017, PASA announced plans to launch a voluntary mediation service to help “resolve the issues experienced by schemes during the transfer of administration services from one provider to another”.

The service will be voluntary and non-binding, seeking to bring the scheme, ceding and receiving administration providers together for “practical and fair solutions in line with good industry practice”. The mediators will be independent of administration firms to avoid conflicts of interest. PASA intends to publish details of the scheme for formal launch in January 2018.

PASA also confirmed that its administrator members will be required to comply with PASA’s Code of Conduct on Administration Provider Transfers from 1 January 2018.

PPF publishes note on risk appetite

The PPF has published a revised “risk appetite” statement. The note looks at the PPF Board’s attitude towards its key strategic, funding, financial and operational risks. In particular, it sets out the level of risk that the Board chooses to take in pursuit of its strategic objectives.

The risk appetite is set and reviewed annually by the Board, and monitored by the Risk Audit Committee and the Investment Committee.

PPI publishes “The Future Book” third edition

The PPI published the third edition of its “Future Book: unravelling workplace pensions”, its annual DC compendium commissioned by Columbia Threadneedle Investments.

The report sets out available data on the DC landscape alongside commentary, analysis and projections of future trends. Amongst other findings, it notes that 99.7% of master trust members continue to remain invested in default fund options.

TPR publishes blog on 21st century trusteeship

TPR has published a blog titled “21st century trusteeship – why standards need to rise”, considering what it means to be a trustee now and in the future.

Written by Liz Hickey, TPR’s Director of Communications, the blog examines 21st century trusteeship and TPR’s current focus on improving the governance and administration of schemes. It notes that further emails and changes to TPR’s website can be expected “every month”, with topics to be covered including trustee roles and responsibilities, competence, training and managing risk.