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
- Response to consultation on the creation of a single financial guidance body
- Response to consultation on safeguarded benefits and the advice requirement
- Secretary of State for Work and Pensions speaks at ABI conference
- PPF publishes ninth issue of its Technical News series
- PPF Annual Report 2016/17 published
- PPI issues Briefing Notes 99 and 100
- PQM consults on the future standards for DC pension provision
- Industry groups join to develop formal standards for professional trustees
- TPR warns trustees to meet basic governance requirements or face financial penalties
- Office manager convicted of withholding information from TPR
- Work and Pensions Select Committee chair re-elected
On 4 July 2017, the DWP and HMT released their response to the consultation on the creation of a single financial guidance body.
The document sets out the government’s response to the consultation, and outlines further detail on the plan to create a new single financial guidance body to replace The Money Advice Service (“MAS”), The Pensions Advisory Service (“TPAS”) and Pension Wise. The new body, which the Queen’s Speech announced, and the Financial Guidance and Claims Bill will legislate for, is to be developed with the aim of providing and commissioning pensions guidance, money guidance and debt advice and to complement financial guidance provided by the third sector and industry.
The government anticipates that the new guidance body will be launched no earlier than autumn 2018.
On 6 July 2017, the DWP published a response to its autumn 2016 consultation on possible changes to the requirement to take appropriate independent advice for individuals with “safeguarded benefits” (the “advice requirement”).
In brief, the Government intends to:
- simplify the process for valuing a member’s benefits for the purposes of determining whether the advice requirement applies. (It does not apply where the total value of the member’s (or survivor’s) safeguarded benefits is £30,000 or less)
- introduce tailored risk warnings which explain the likely impact of surrendering potentially valuable guarantees
- put in place transitional provisions to ensure members with a transfer value below £30,000 are not put to the expense of taking financial advice once the law no longer requires it.
The regulations are due to come into force on 6 April 2018. Please see our forthcoming Alert for further details.
On 4 July 2017, the new Secretary of State for Work and Pensions David Gauke addressed the Association of British Insurers long term savings conference.
Amongst other things, he “welcome[d] the contributions of John Cridland, and the Government’s Actuary Department, to [the Government’s] thinking on the future State Pension age”, saying “it represents exactly the sort of longer-term approach I want to cultivate within my department, and across wider government”. We await developments on the review of SPA, as the recent General Election forestalled the Government’s anticipated response to the independent review.
He also praised the Pensions Dashboard initiative, and the roll-out of automatic enrolment, commenting that “the Conservative Party manifesto commits us to expanding pensions entitlements to include workers who are self-employed”.
On 5 July 2017, the PPF published Issue 9 of its Technical News, a newsletter on topical issues including practical guidance for schemes in PPF assessment periods and FAS qualifying schemes. Issue 9 covers:
- “Stand Alone” and “Separate Scheme” Lump Sums
- the treatment of GMPs during assessment
- updates to the Data Interface Layout
- General Data Protection Regulation compliance.
The PPF published its 2016/17 Annual Report and Accounts on 7 July 2017.
The accompanying press release reported “a healthy financial position”, with the PF’s funding ratio increasing to 121.6 per cent, up from 116.3 per cent in 2015/16, in what had been “an eventful year for pensions”.
Alan Rubenstein, Chief Executive of the PPF, said: “The last year has been full of significant developments in the world around the PPF. We’ve had a successful year and we continue to make steady progress towards our strategic objectives. Members can be reassured by the protection the PPF provides. However, we are not complacent as we continue to face large deficits in the schemes we protect. Our robust strategy has put us in a good position to manage the uncertainties ahead and our long-term risk model predicts that we will achieve financial self-sufficiency by 2030 in 93 per cent of scenarios.”
The Pensions Policy Institute has published two new Briefing Notes.
Briefing Note 99 (“PhD Series 2: The impact of automatic enrolment in Italy, New Zealand and the USA”) examines what is known about the experience of automatic enrolment for pensions in Italy, New Zealand and the USA. The note summarises existing research on these national cases to determine what may be learned for the future of auto-enrolment in the UK.
Briefing Note 100, simply called “100th Briefing Note”, celebrates the landmark, detailing the main pension policy changes from 2003 to the present, as well as outlining how the current pensions landscape may change in the future due to a number of reviews and initiatives for both State and private pension. It concludes that many questions still remain in the pensions arena (including the trade-off between affordability and adequacy), as well as questioning the role of defaults, nudges, and incentives in private pensions.
On 6 July 2017, The Pension Quality Mark Ltd announced a consultation on the future standards for DC pension provision in the U.K. It covers both the Pension Quality Mark (“PQM”) for individual employer schemes, and the Pension Quality Mark Ready (“PQM Ready”) for multi-employer schemes.
The press release notes that, “since being launched, PQM (2009) and PQM Ready (2013) have become the highest accreditation available for the provision of individual and multi-employer DC pensions in the U.K. However, since both were introduced there have been considerable developments in the DC market. As a result regulation and best practise now meet many of the PQM standards. To continue this success the PQM board is proposing to review and enhance the standards required to achieve the PQM and PQM Ready accreditations”.
Areas covered by the consultation include:
- introducing ways to encourage employees to take up higher levels of employer matching contributions
- increasing minimum contribution levels
- removing age bands for pension provision
- reviewing fee cap levels
- extending the standards to assess schemes approaches to corporate stewardship and environmental, social and governance issues
- improving board performance through regular external assessment of trustee performance
- extending the standards to cover GPPs.
The consultation closes on 4 August 2017, with the new standards set to be released prior to the end of 2017.
The APPT issued a press release on 6 July 2017, announcing that a joint industry initiative, The Professional Trustee Standards Working Group, has been tasked with the goal of establishing a set of “Fit and Proper Protocols” to be met by professional trustees, and which will cover will cover competencies, experience and professionalism. The group has been created following a recommendation by TPR, that the trustee bodies across the pension industry come together to lead the way in setting standards that professional trustees are expected to meet, and TPR will encourage professional trustees to adhere to the Protocols on created.
The Professional Trustee Standards Working Group is chaired by Andrew Bradshaw, Association of Professional Pension Trustees Council Member, with representatives from TPR, APPT, The Association of Corporate Trustees, the PMI and PLSA.
On the same day, TPR published its report of findings of the 2017 Professional Trustee research survey, as part of TPR’s 21st Century Trustee initiative. Lesley Titcomb, TPR chief executive said “We want to see trustees who are a knowledgeable, empowered first line of defence for pension scheme members. Our survey, published today, shows professional trustees have an influence on many thousands of schemes. We look forward to working with the industry group to produce clear, succinct standards and accreditation for professional trustees, helping employers and schemes to engage high-quality professionals and deliver good outcomes for members.”
On 5 July 2017, TPR reminded trustees of pension schemes who fail in their basic duties that they can expect to receive penalties.
TPR issued two compliance and enforcement bulletins showing how it has used its powers to tackle non-compliance with the legal requirements for pension schemes to complete a scheme return and annual chair’s statement. The aim of the bulletins is to inform the industry of TPR’s experience to date and to increase trustees’ understanding of these duties.
Although the majority of schemes complied with the requirement to prepare a chair’s annual governance statement, in 2016 85 schemes received a mandatory fine for not doing so. TPR notes that “a large proportion of those failing to produce a statement” were schemes with fewer than 100 members.
In relation to scheme returns, TPR issued fines to 88 trustees who failed to comply even after receiving a warning from the Regulator.
Nicola Parish, Executive Director for Frontline Regulation at TPR, said: “Non-compliance with basic requirements such as completion of a chair’s statement and a scheme return may indicate broader governance issues. This is important because ultimately, poor standards of governance can impact the value of members’ pension pots […] Our 21st Century trustee work is focused on raising the standard of trusteeship and our enforcement action is an important part of that […] Our message to [trustees] is that ignorance is no excuse – if you breach your duties, you will face action.”
In the third criminal conviction secured by TPR, the former office manager of a company at the centre of a suspected £13.75 million scam inquiry has been convicted of refusing to provide information relevant to the investigation and fined more than £4,000.
Mike Birch, TPR’s Director of Case Management, said: “We will not hesitate to prosecute those who prevent us gathering the data we require for our investigations […] Information notices are a key enforcement tool for TPR to help us tackle those abusing the system. Refusing to comply with a legal request from [TPR] will not be tolerated.”
It has been confirmed that Frank Field will return to the Work and Pensions Committee (“WPC”) as chairman.
As the only candidate for the position, Frank Field will be declared to be elected unopposed when the Speaker announces the result of the Chair elections after the ballot held on 12 July 2017.
The elected MP takes up the position as Chair of the Committee when the remaining members of the committee have been appointed by the House.