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:

TPR’s DC Code of Practice brought into force
ABI has launched a comprehensive review of the UK’s retirement needs
DWP encourage people to have their say on pension charges
DWP publish research on charges in DC pension schemes
FRC publishes consultation paper on amending AS TM1 for revised disclosure regulations
The attitudes of young employees towards retirement saving
Pension Ombudsman determination in Mrs P Tuttle

TPR’s DC Code of Practice brought into force

The Pensions Act 2004 (Code of Practice) (Governance and Administration of Occupational Defined Contribution Trust-Based Pension Schemes) Appointed Day Order 2013 was published on 13 November 2013. It will bring TPR’s Code of Practice No. 13: Governance and administration of occupational DC trust-based pension schemes into force with effect from 21 November 2013.

Please see our Alert for more information about TPR’s DC Code.

ABI has launched a comprehensive review of the UK’s retirement needs

On 14 November 2013, the ABI launched the first comprehensive review of the UK’s retirement needs.

The review will cover:

people’s financial needs and concerns about retirement
how effectively the current state and retirement income products cater for retirement needs and
what changes are needed to ensure adequate retirement incomes.

As well as seeking the views of consumers, the ABI will be inviting views and evidence from pension experts, think-tanks, consumer groups, health organisations, politicians and unions.

Views are invited by 20 December 2013. Following submissions, the ABI will hold a series of workshops early in 2014 with key stakeholders, including consumer groups, to discuss issues raised. A final report, including recommendations for reform, will be published in spring 2014.

DWP encourage people to have their say on pension charges

The Government is urging people to take part in a consultation on workplace pension charges before it closes on 28 November 2013.

The consultation so far has received support from consumer and trade organisations alike but the government wants to make sure that those who pay into pensions get their chance to put forward their views.

By 2018 up to 11 million people will be eligible to be automatically placed into a pension by their employer and those schemes should give savers good value for money. The consultation looks at options for a cap on pension charges, including:

a higher charge cap of 1% of funds under management
a lower charge of 0.75% of funds under management
a two-tier ‘comply or explain’ cap – a standard cap of 0.75% of funds under management for all qualifying schemes and a higher cap of 1% available to employers who report to TPR why the scheme charges in excess of 0.75%.

For further details, please see our Alert for more information on the proposed charges cap.

DWP publish research on charges in DC pension schemes

The DWP has published a report on research to determine the annual management charge (AMC) applied to members in trust and contract based pension schemes.

It found that:

the average AMC for trust-based schemes was 0.75% with members of the largest schemes paying far less (0.42%)
members paying the highest charges (over 1%) were those on low salaries and with low employer contributions; as well as those whose employers used a commission-based adviser
the average AMC for contract-based schemes was 0.84%, again with members of the largest schemes paying far less (0.51%)
older contract-based schemes, such as those sold before 1991, Stakeholder Pensions, smaller schemes and schemes with lower employer contributions were most likely to face charges of over 1%.

FRC publishes consultation paper on amending AS TM1 for revised disclosure regulations

The FRC has published a fast-track consultation paper on proposed amendments to Actuarial Standard Technical Memorandum 1 (AS TM1) to reflect changes to be introduced by new disclosure regulations with effect from 6 April 2013.

The new disclosure regulations will consolidate and amend some of the requirements for disclosure of information to pension scheme members, introducing additional options. The amendments include changes to the information shown in Statutory Money Purchase Illustrations. Accordingly, the FRC proposes changes to AS TM1 to enable providers to present illustrations which allow:

for cash lump sums to be taken out prior to the calculation of the illustrated pension
varying percentages of dependants’ pension to be assumed and
different levels of pension increases to be assumed
the amendments to the disclosure regulations and AS TM1 will mean that, from 6 April 2014, pension providers can present more personalised illustrations to pension scheme members in their annual statements.

The consultation period ends on 13 December 2013.

The attitudes of young employees towards retirement saving

Recent research carried out by Aegon explored the attitudes of young employees towards their retirement.
Aegon investigated the feelings of working adults between the ages of 20 and 29 and has found:

59% expect to be worse off financially in their retirement than their parents
37% believe that they are likely to fall short of their retirement needs
27% believe that their retirement shortfall will be large and
44% do not think that they will be able to choose when to retire.

Pension Ombudsman determination in Mrs P Tuttle

The Pensions Ombudsman has upheld a complaint from Mrs Tuttle, an NHS pension scheme member, that she retired early on the basis of an incorrect benefit quotation from her scheme.

Concluding that the member had relied on the incorrect quotation to her detriment, the Deputy PO awarded her the pension she would have received had the quotation been correct.