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:

• Social Security Pensions Orders
• Government outlines proposals for Automatic Transfers System
• New Pensions Ombudsman appointed
• Response to consultation on amendments to the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013
• HMRC publishes guidance on the new DC flexibilities
• TPR issues new guidance to help trustees get ready for landmark pension reforms
• TPR publishes consultation guidance on transfers from DB to DC schemes

Social Security Pensions Orders

Three Orders have been laid before Parliament today (16 February 2015).  For the tax year 2015/16:

• The Social Security Revaluation of Earnings Factors Order 2015 sets the rate for revaluing SERPS/S2P, as well as GMPs in contracted-out DB schemes, in line with the movement in average earnings.  This is set at 1.5%, reflecting the increase in average earnings in Great Britain in the year to September 2014.
• The Social Security Pensions (Low Earnings Threshold) Order 2015 sets the LET at £15,300 (up from £15,100).  Individuals with earnings between the LEL and the LET, as well as qualifying carers and qualifying disabled people, are treated as having earnings at the LET for the purpose of calculating S2P.
• The Social Security Pensions (Flat Rate Accrual Amount) Order 2015 increases the flat-rate accrual amount of S2P from £92.00 to £93.60.  This element was introduced with effect from 6 April 2012 to replace the 40% accrual band on earnings between the LEL and the LET.

The Orders will come into force on 6 April 2015.

Government outlines proposals for Automatic Transfers System

Following the introduction of automatic enrolment in 2012, it is expected that there will be a proliferation of dormant, often small, DC pension pots.  The Government intends to address this with a new system of automatic transfers (commonly known as “pot follows member”).

Back in 2013, the Government issued a Command Paper which provided details of its proposals (see our Alert) and a legislative framework for its introduction was set out in the Pensions Act 2014 (see our Alert).

On 11 February 2015, the Government published its proposals for a framework for the automatic transfer of people’s pension pots when they change jobs.  The DWP’s update sets out how workers will be able to consolidate small pension pots within their current employer’s pension scheme.

It is intended that automatic transfers will initially apply to a limited number of larger schemes.  The first stage will be to introduce automatic matching of an individual’s “mini” pots.   A person will be contacted to confirm if they want these pots to be moved to their new scheme.  To begin with, an opt-in system will be used, ahead of the introduction of a full opt-out model.

The Government’s aim is to have an automatic pot-matching system in place by autumn 2016.

We will be publishing an Alert on the proposals shortly.

New Pensions Ombudsman appointed

On 13 February 2015, the DWP announced that Anthony Arter has been appointed Pensions Ombudsman and PPF Ombudsman.  He will take up his post from 25 May 2015 for a four year term.

Response to consultation on amendments to the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013

The Occupational and Personal Pension Schemes Disclosure of Information Regulations 2013 specify the information that must be disclosed by occupational and personal pension schemes.  They apply to public service pension schemes, subject to certain exemptions.

The changes proposed are designed to ensure that the regulations work as intended in relation to the new public service pension schemes which are being introduced from April 2015 under the Public Service Pensions Act 2013.

They also cover certain amendments relating to the budget flexibilities. The DWP published its response to the consultation on 12 February 2015.  The final regulations are due to come into force on 6 April 2015.

HMRC publishes guidance on the new DC flexibilities

On 12 February 2015, HMRC issued guidance on the changes to DC retirement options from 6 April 2015.  The publication covers the three main options (lifetime annuities, flexi-access drawdown and lump sum payments) and explains how they are taxed.

TPR issues new guidance to help trustees get ready for landmark pension reforms

On 12 February 2015, TPR published the first part of a communications package designed to help trustees prepare for the significant changes in the pensions landscape that come into force on 6 April this year. The package will include:

• An “essential guide” for trustees of schemes providing money purchase benefits on new rules about governance and charge controls.
• Guidance for trustees of DB schemes on member requests for transfers from DB to DC schemes in order to access the new pension flexibilities.  (A draft version of this guidance has been published, see below.)
• Guidance for trustees to address the new pension flexibilities, including how trustees should direct their members to the new Pension Wise service.  This guidance is due out in March, following the publication of further DWP regulations.
• Updated “scorpion” communications materials (also due out in March) to help members understand the risks of pensions and investment scams, which are expected to evolve as a result of the new pension freedoms.

TPR’s executive director for DC Andrew Warwick-Thompson said:

“The new minimum governance standards complement our existing DC code of practice and provide a stronger foundation in law for the standards we’ve said we expect of trustees in order to provide good outcomes for members.

In the meantime, we expect trustees to still refer to the existing DC code, which we will update later this year to reflect the April 2015 legislative changes, and we will continue to highlight to trustees any changes in the law.”

TPR publishes consultation guidance on transfers from DB to DC schemes

On 12 February 2015, TPR published a consultation on guidance for trustees of DB schemes on member requests for transfers from DB to DC schemes. The draft guidance aims to:

• help trustees ensure they have appropriate processes in place to manage transfer requests
• prompt trustees to consider the impact of transfer values as part of an integrated approach to risk management of their scheme
• require trustees to provide clear information for members so that they can get independent advice on the best option for them.

The consultation closes on 17 March 2015.  For further details, please see our Alert.