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

Finance Bill 2017-2019 published

The Finance Bill 2017-2019 (formerly referred to as the Finance (No.2) Bill 2017) received its first reading in the House of Commons on 6 September 2017. This followed the passing of the resolutions that form the basis of the Bill on the same date, for which updated explanatory notes have been published.

The new Bill aims to legislate for all policies that were included in the pre-election Finance Bill (now the Finance Act 2017), but which were dropped before the final version to ensure that it received Royal Assent before Parliament was dissolved in advance of the 2017 General Election. From a pensions perspective this includes:

  • the reduction of the money purchase annual allowance (“MPAA”) from £10,000 to £4,000
  • the introduction of a new Pension Advice Tax exemption – provisions allowing employers to pay for individuals to take relevant pensions advice, or to reimburse individuals for the costs of such advice, without any liability for income tax arising provided that the payment did not exceed £500 in a tax year.

As drafted, these provisions are due to have retrospective effect to 6 April 2017.

The Bill was published on 8 September 2017 and its second reading (the first opportunity for a Bill to be debated) will take place on 12 September 2017. The House of Commons Library published a briefing on the Bill on 11 September 2017.

It has also been confirmed that a further Finance Bill will be introduced following the autumn Budget. A draft of this second Finance Bill is expected to be published on 13 September 2017, along with accompanying explanatory notes and other supporting documents. The consultation on this Bill will run until 25 October 2017. The Bill will become the Finance Act 2018 on Royal Assent.

The Employers’ Duties (Miscellaneous Amendments) Regulations 2017

The Employers’ Duties (Miscellaneous Amendments) Regulations 2017 were laid before Parliament on 5 September 2017.

The regulations make some technical changes to the auto-enrolment regime for “post-staging” employers (employers who fall under the auto-enrolment regime from 1 October 2017) to ensure that changes previously introduced on 1 April 2017 (by The Employers’ Duties (Implementation) (Amendment) Regulations 2017) work as intended. The need for the technical changes was identified in the course of ongoing dialogue with stakeholders following publication of the original regulations.

The new regulations take effect from 1 October 2017.

FCA data reveals continuing decline in annuities

The FCA’s latest Data Bulletin (Issue 10), published on 8 September 2017, includes a summary of trends in the retirement income market, and focuses on insights from its consumer contact centre. The data covers the period October 2016 to March 2017. Findings for the period include that:

  • the number of full cash withdrawals grew by 18% from the same period the previous year
  • the number of annuity sales fell by 16%, to their lowest level since the retirement freedoms were introduced
  • in 58% of cases, when pensions with GARs were accessed, the GAR option was not taken up.

PLSA publishes discussion paper on good pension fund governance

On 6 September 2017, the PLSA published Good Governance – how to get there: A PLSA discussion paper setting out the PLSA’s definition of good pension fund governance.

The paper argues that “inputs” determine the quality of scheme governance. These inputs are chiefly concerned with the qualities of scheme governance bodies and the support they are able to draw upon. It suggests that TPR should concentrate on ensuring that individuals who are appointed to boards and committees have the appropriate knowledge and experience.

Joe Dabrowski, Head of Governance & Investment at the PLSA, commented: “The most important ingredient of good governance is the people who provide it. Pension schemes are affected by the fortunes of their sponsors and the wider economy so cannot guarantee success, but governance bodies that are expert, effective and diverse give them the best possible chance of success.”

TPR launches first prosecutions for failing to give staff workplace pensions

TPR has announced that it is prosecuting a firm and its managing director for deliberately not putting staff into a workplace pension. The firm is accused of failing to comply with the law on automatic enrolment (an offence under section 45 of the Pensions Act 2008), and the managing director accused of either consenting or conniving in the firm’s offence, or allowing the offence to be committed by neglect (an offence under section 46 of the same act).

The case will be heard in the Magistrates’ Court, where the maximum sentence is an unlimited fine.

This is the first time that TPR has launched prosecutions for such offences.

TPR sets out action to tackle gaps in scheme governance

On 7 September 2017, TPR published the responses to two surveys which were commissioned with the aim of gauging how schemes are meeting expectations, and to explore the barriers they face.

The DC survey and response and the DB survey and response reveal the majority of members are in “relatively well-run” schemes. However, higher standards of governance, and compliance with the principles of TPR’s codes, tend to be a feature of larger better managed schemes.

For individual small and medium schemes the surveys are “disappointing and highlight major gaps in the standards expected by TPR”, including that:

  • they tend to display poorer governance standards
  • many small and medium DC schemes are not meeting standards around administration, investments and value for members
  • “significant issues” also remain among DB schemes, in particular around integrated risk management.

Anthony Raymond, Acting Executive Director for Regulatory Policy, said: “The evidence we are publishing today illustrates that while some trustees are doing a good job, many trustee boards have failed to act on our codes and guidance to meet basic standards of good governance. […] we will not stand by and let it continue.”

TPR intends to take action through its education programme including the forthcoming 21st Century Trusteeship campaign, by “stepping up” its regulatory action in cases where trustee boards fail to meet minimum legal standards, and by continuing to examine whether sub-standard schemes should be consolidated with larger, well-run schemes.