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:

• New figures from DWP show growth in pension saving
• Automatic enrolment opt-out rates
• DWP issues guidance on the change to the definition of “money purchase benefits”
• HMRC updates guidance on pension flexibility

New figures from DWP show growth in pension saving

New figures released by the DWP on 3 November 2014 show the private sector industries and occupations which have seen the most significant growth in pension saving since 2012.

Sales and customer service has seen a leap in participation of 15% (from 27% to 42%), while those working in distribution, hotels and restaurants have seen a climb from 27% to 36%.

Other parts of the economy seeing a big jump in pension saving include energy and water, where the number of staff participating in a scheme has risen from 64% to 74%.

Other key facts include:

• £39.7 billion worth of pension savings in the private sector in 2013 – £11.3 billion in employee contributions, £24.5 billion in employer contributions and £3.9 billion in tax relief
• total annual amount saved in private and public sector pensions stood at £77.6 billion – up from £73.3 billion in 2012
• there was a 4% rise in both men and women saving in private sector schemes, with 47% of men and 44% of women saving in 2013
• automatic enrolment started with the biggest employers first – private sector firms with 5,000 or more staff have 64% saving, up from 49% in 2012
• pension saving in the public sector remained high at 5 million (90%).

Automatic enrolment opt-out rates

On 4 November 2014, the DWP published the findings from a survey of 50 employers with between 90 and 499 workers who have staged for automatic enrolment between January 2014 and July 2014.  It contains information on:

• opt-out rates
• characteristics of workers opting-out
• reasons given for opting-out
• employer implementation and attitudes towards automatic enrolment
• lessons for smaller employees.

DWP issues guidance on the change to the definition of “money purchase benefits”

The Supreme Court’s July 2011 decision in Bridge Trustees concluded that it was possible for certain benefits to be within the definition of “money purchase benefits” despite there being a potential mismatch between assets and liabilities. The DWP immediately announced that it would legislate to reverse the effect of this decision, with retrospective effect, by introducing a new definition of “money purchase benefits”.

The revised definition of “money purchase benefits” came into force on 24 July 2014 (with retrospective effect to 1 January 1997).

On 5 November 2014, the DWP published guidance for the trustees or managers of occupational pension schemes to help them identify benefits that might be affected by the recent changes in the law, and to understand what those changes mean in practice.

Trustees and managers need to consider whether their scheme provides any benefits that fall outside the definition of “money purchase benefits” which, before 24 July 2014, were treated as money purchase benefits. If so, trustees and managers need to take account of how the relevant Transitional Regulations (for details, please see our Alert) apply to their schemes.  The guidance sets out the different circumstances in which the legislation may apply.

The guidance makes it clear that it does not constitute an authoritative statement of the law. Trustees with particular concerns as to the application of the revised definition of “money purchase benefits” to their scheme should speak to their usual contact at Sackers.

HMRC updates guidance on pension flexibility

On 7 November 2014, HMRC issued an updated version of its Tax Information and Impact Note regarding the new measures which will apply from 6 April 2015 to give individuals greater flexibility when accessing DC pension savings.