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:

BIS publishes draft legislation on shared parental leave and pay
HMRC publishes the latest minutes of the Pensions Industry Stakeholder Form
HMRC publishes first “Countdown Bulletin”
HMRC issues reminder to submit FP14 applications by 5 April 2014
NAPF publishes guide on indices and benchmarks
NAPF launches findings of third Investment Consultants’ Performance Survey
51 firms with nearly £10.5 trillion of assets under management complete the NAPF Stewardship Disclosure Framework
PPF issues consultation on valuation assumptions

BIS publishes draft legislation on shared parental leave and pay

BIS is seeking views on draft legislation on shared parental leave and pay. The draft regulations, which were published on 5 March 2014, aim to make the new system of shared parental leave and pay meet the needs of parents and employers and make it as simple to use as possible.

The aim is to bring the new rules for shared parental leave and pay into effect for babies due on or after 5 April 2015.

HMRC publishes the latest minutes of the Pensions Industry Stakeholder Form

On 6 March 2014, HMRC published the minutes from the Pensions Industry Stakeholder Forum meeting on 22 November 2013. Agenda items included:

Update on QROPS

Update on the Scottish rate of Income Tax

Pension liberation.

HMRC publishes first “Countdown Bulletin”

On 5 March 2014, HMRC issued its first “Countdown bulletin” which provides information for Pension Scheme Administrators and Trustees about the end of contracting-out.

HMRC issues reminder to submit FP14 applications by 5 April 2014

On 3 March 2014 they issued a reminder that individuals can protect their pension savings by applying for FP14, but must apply by 5 April 2014.

From 6 April 2014 the standard LTA will be reduced from £1.5 million to £1.25 million.

If you would like further information on FP14, please speak to your usual contact at Sackers.

NAPF publishes guide on indices and benchmarks

On 6 March 2014, the NAPF issued a new guide to help pension funds get to grips with indices and benchmarks and how best to use them.

This guide is the latest addition to the NAPF’s made simple series. It looks at how indices work and how they can be used by pension funds when looking at their investment strategies.

NAPF launches findings of third Investment Consultants’ Performance Survey

On 5 March 2014, the NAPF launched the findings of its third Investment Consultants’ Performance Survey.

Key findings included:

80% of both DB and DC schemes would recommend their investment consultancy

Satisfaction with investment consultants is lower in DC schemes than DB

Average consultancy tenure has shortened by approximately one year since 2009

There is growing in house expertise among DB schemes, especially among larger funds

Only 30% of schemes are “very satisfied” with consultants’ stewardship capabilities

Consolidation means a few consultancies have a great deal of influence.

51 firms with nearly £10.5 trillion of assets under management complete the NAPF Stewardship Disclosure Framework

The NAPF published its Stewardship Disclosure Framework (the “Framework”) in October 2013. On 5 March 2014, it announced that, since then, 51 asset managers (including 30 of the 50 largest firms by assets under management (AUM) which have signed up to the Stewardship Code) have responded to the NAPF’s call for greater transparency and completed a Framework for their firm. These firms represent almost £10.5 trillion of AUM.

A further six firms have committed to completing the Framework by the end of March 2014, representing a further £3tr of AUM. Completion of the Framework by these firms will bring the total to 57 asset managers representing almost £14 trillion of AUM.

PPF issues consultation on valuation assumptions

The PPF is responsible for keeping the assumptions used for valuations under sections 143 and 179 of the Pensions Act 2004 (and those under sections 152, 156 and 158 that are conducted under similar principles) in line with estimated pricing in the bulk annuity market. It is considering, subject to consultation, making some changes to these assumptions in the light of recent developments in the buy-out market.

The proposed assumption changes are to:

Reduce the discount rate used to value level compensation in payment by 0.5% pa

Reduce the net discount rate used to value increasing compensation in payment by 0.1% pa

Increase the net discount rate used to value increasing compensation in deferment and accrued after 5 April 2009 by 0.4% pa

Update the base mortality assumptions to use the Continuous Mortality Investigations self-administered pension schemes “S1” tables adjusted for a factor of 0.9 to age-related probability of death in the next year

Update future mortality improvements to use the Continuous Mortality Investigation Mortality Projections Model CMI_2012 with mortality improvements converging to a single long-term rate of 1.5% pa for males and 1.0% pa for females

Increase benefit installation / payment expenses by 100%

Update adjustments based on an individual’s benefit size (before application of the compensation cap and 90% reduction) to use S1 “Heavy” and S1 “Light” mortality tables and align the boundaries of benefit size to be in line with the thresholds of the data used for those tables (this change would not apply to valuations under section 179).

The PPF plans to introduce these changes for valuations with an effective date on or after 1 May 2014. The last time the PPF changed these assumptions was in April 2011. The changes proposed to the assumptions will potentially lead to a small increase in the number of schemes transferring to the PPF, but the PPF does not expect the financial effect to be particularly significant.

The consultation closes on 16 April 2014.