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

Safeguarded benefits and advice requirements – legislation made

The Pension Schemes Act 2015 (Transitional Provisions and Appropriate Independent Advice) (Amendment No. 2) Regulations 2017 were made on 12 December 2017, and will come into force on 6 April 2018.

The regulations have been designed to simplify the process for trustees and scheme managers to value members’ pension savings which are classified as “safeguarded” (generally DB) benefits, when determining whether the requirement to take financial advice applies. They also make transitional provisions to require that members are informed promptly if they are affected by the change.

For further information on the changes to which these regulations relate, please see our Alert on the Government’s original Response to consultation on safeguarded benefits and the advice requirement.

Pension funds and social investment: the Government’s interim response

The DDCMS and DWP have published their interim response to the Law Commission’s report on pension funds and social investment.

It provides the Government’s first view of the Law Commission’s recommendations and areas in which it is considering taking action. It includes plans to clarify legislation around:

  • the consideration of broader long-term financial risks
  • the ability of pension scheme trustees to consider members’ non-financial or ethical concerns
  • the role of engagement alongside voting as an important aspect of stewardship of pension scheme assets.

Where proposals would be the responsibility of regulators, the Government will work with the relevant parties as they consider the recommendations.

In addition, the response states that the DDCMS and DWP will work together and with stakeholders, within government and externally, to provide a full response to the Law Commission’s report by June 2018. The Government then aims “to consult on policy and regulations during 2018. Subject to the outcome of that consultation, legislation will be brought forward for Parliamentary approval at the earliest reasonable opportunity”.

Automatic enrolment review 2017 published

On 18 December 2017, the DWP published its review of the automatic enrolment regime, “Automatic enrolment review 2017: Maintaining the momentum”.

Alongside the review, the DWP published its Automatic Enrolment Evaluation Strategy (a framework for evaluating the effectiveness of automatic enrolment beyond 2017), the Automatic Enrolment Review 2017: Analytical Report (setting out the analysis and findings used to inform the review), and a review of the earnings trigger and qualifying earnings band for 2018/19.

Proposals include:

  • widening the age criteria for automatic enrolment, to change the lower age limit from 22 to 18 while keeping the upper age limit at SPA
  • removing the lower earnings limit (“LEL”). Currently, minimum contributions for automatic enrolment purposes are payable on band earnings between £5,876 and £45,000. It is proposed that everyone earning over £10,000 a year (the existing earnings trigger for automatic enrolment), and who meet the other eligibility rules, would be automatically enrolled and get pension contributions on their earnings from the first pound, up to the Upper Earnings Limit (currently £45,000). It is intended that the £10,000 earnings trigger will continue to be reviewed annually
  • testing “targeted interventions” and “a number of different approaches aimed at increasing the savings of self-employed people from 2018, with a focus on those with low to moderate incomes”. The review states that the Government “will then set out proposals to implement the most effective approaches at scale”
  • “a package of measures, and a call upon the pensions industry, employers and wider government, to work together to deliver better engagement with individuals on the benefits of workplace saving”.

The review states that the Government’s “ambition is to implement these changes to the automatic enrolment framework in the mid-2020s.” The next review of automatic enrolment is also due to be carried out in 2020.

Financial Assistance Scheme increased cap for long service – consultation outcome

The DWP has released a response on “Applying the Financial Assistance Scheme increased cap for long service”, following its September 2017 consultation.

Assistance provided by the FAS is currently capped, and the consultation sought views on draft regulations to apply an increased cap in respect of FAS members with long pensionable service (over 20 years) in a single scheme.

The response document summarises the feedback received and sets out how the Government intends to proceed. It has decided to continue to introduce legislation to create the FAS long service cap, but with some amendments to the originally proposed regulation following the feedback.

The increased cap is currently expected to be implemented from 6 April 2018.

Law Commission publishes law reform proposals

On 14 December 2017, the Law Commission published its 13th Programme of Law Reform, setting out 14 areas it plans to consider for reform. Working with experts and the public, its aim is “to make sure the law is modern, simple and fair as it makes its recommendations”.

Amongst other areas, it will look at clarifying the law surrounding the electronic execution of documents, including areas of concern that currently exist around how an electronic signature should be witnessed.

Professional Trustee Standards Working Group consultation on standards for professional trustees

The Association of Professional Pension Trustees (“APPT”) has published the Professional Trustee Standards Working Group’s (“PTSWG”) consultation on its draft standards for professional trustees.

The aim of the standards, which will be applied on a “comply or explain” basis, is to improve the quality of professional trustees and eliminate poor practices from the market. They will apply to anyone falling within TPR’s trustee description policy.  Additional standards for trustee chairs are also proposed.

It is stated that TPR supports the standards and will consider compliance with them as an indicator of fitness and propriety.

The consultation closes on 2 March 2018, and it is intended that the standards will apply from April / May next year. Once the professional trustee standards are in place, the PTSWG plans to develop an accreditation framework which professional trustees will be expected to meet. Details are due to be published in 2018.

Scottish Budget – tax rate changes

The draft Scottish Budget for 2018-19 was delivered on 14 December 2017. As anticipated, it set out proposed income tax rate changes.

The proposed changes (to take effect from April 2018) are:

  • a new starter rate of 19p for earnings over £11,850 and up to £13,850
  • a freeze on the basic rate at 20p for earnings over £13,850 to £24,000
  • a new intermediate rate of 21p for earnings over £24,000 to £44,273
  • a 1% increase to the higher rate (earnings over £44,273 to £150,000) and top rate (earnings over £150,000), to 41p and 46p respectively.

HMRC published its latest Scottish rate of Income Tax newsletter on 18 December 2018 containing updates and guidance for pension schemes. It states that HMRC will be working closely with the Scottish Government and with pension providers “on the implications of that change for pension tax relief, and to clarify how the mechanisms for providing relief will operate in respect of Scottish pension savers”.