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
- Automatic enrolment earnings trigger and qualifying earnings band
- The Registered Pension Schemes (Relief at Source) (Amendment) Regulations 2018
- Government publishes response to Taylor Review
- DWP updates guidance on information requirements where members hold rights to safeguarded-flexible benefits
- FCA and TPR strategy for pensions
- International Accounting Standards Board issues amendments to IAS 19
- Pensions Institute publishes discussion papers
- PPF releases updated compensation cap factors
- PPF updates its fraud compensation fund guidance
- PPI issues Briefing Note 105
- TPR issues fine for failure to audit accounts
- Fines issued in auto enrolment breach case
The Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2018 has been laid before Parliament.
The Order confirms the upper and lower thresholds of the qualifying earnings band (for calculating contributions for automatic enrolment purposes) for the 2018/19 tax year. These will continue to be aligned with NIC rates – £6,032 for the lower limit of the qualifying earnings band, and £46,350 for the upper limit.
The current automatic enrolment and re-enrolment earnings trigger of £10,000 remains unchanged for 2018/19.
The Order is due to come into force on 6 April 2018.
The Registered Pension Schemes (Relief at Source) (Amendment) Regulations 2018 were laid before Parliament on 8 February 2018, and come into force on 6 April 2018.
The Taylor review considered a range of issues, including the implications of new forms of work, the rise of digital platforms and the impact of new working models on employee and worker rights, responsibilities, freedoms and obligations, and set out 53 recommendations. The reforms form “a vital part” of the Government’s Industrial Strategy.
The response document sets out the Government’s plan of action for taking forward all but one of the recommendations. The proposals aim to “ensure workers know their rights and receive the benefits and protections they are entitled to, and that action is taken against employers who breach workers’ rights”. In the pensions sphere, the Government has accepted the recommendation to “think creatively on ways to improve pension provision amongst the self-employed” and, as part of its automatic enrolment review – “Maintaining the momentum” (published in December 2018) – has already committed to consider how the growing group of self-employed people can be helped to save for their retirement.
Alongside the response, BEIS launched four consultations on key areas covered by the review:
- Employment status
- Increasing transparency in the labour market
- Agency workers
- Enforcement of employment rights
The Government also published its research into the “gig economy” (research on the size of the gig economy, the characteristics of those participating in the gig economy and their experiences within it.)
DWP updates guidance on information requirements where members hold rights to safeguarded-flexible benefits
The DWP has published updated guidance for pension providers, administrators, trustees and scheme managers on safeguarded-flexible pension benefits (ie DC benefits with some form of guarantee).
This guidance follows amendments to the Pension Schemes Act 2015 (Transitional Provisions and Appropriate Independent Advice) Regulations 2015, which come into force on 6 April 2018. As a result, a new section has been added to the guidance covering valuation (paragraphs 1-11), and changes have been made to the section on transitional provisions.
The FCA has announced that it is working with TPR on a “pensions regulatory strategy”, which will set out how they will work together to tackle the key risks facing the pensions sector over the next five to ten years.
A series of events with stakeholders will be held across the country in the spring, focussing on the FCA’s and TPR’s “collective view of the current landscape of the sector” and their respective regulatory remits, and the likely key areas of focus in coming years.
This work will be informed by the FCA’s research and TPR’s ongoing “TPR Future” program, as well as factors such as the outcome of the WPC’s inquiry into the pension freedoms and the impact of the DWP’s review of automatic enrolment.
The IASB has issued amendments to IAS 19 Employee Benefits. “Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)” specifies how companies determine pension expenses when changes are made to a DB pension plan.
IAS 19 specifies how a company accounts for a DB plan. When a change to a plan – an amendment, curtailment or settlement – takes place, IAS 19 requires a company to remeasure its net DB liability or asset. The amendments require a company to use the updated assumptions from this remeasurement to determine current service cost and net interest for the remainder of the reporting period after the change to the plan. Until now, IAS 19 did not specify how to determine these expenses for the period after the change to the plan. By requiring the use of updated assumptions, the amendments are expected to provide useful information to users of financial statements.
The amendments will be effective on or after 1 January 2019.
The Pensions Institute has published two discussion papers in February 2018:
- The Legal Differences between CIDC and CDC compares Collective Defined Contribution (“CDC”) and Collective Individual Defined Contribution (“CIDC”) schemes
- Actuarially Fair Accrual Rates and Deferral of the UK State Pension considers accrual rates and the deferral of the state pension and argues that the current scheme, based upon a uniform accrual rate, cannot meet the objectives of fairness.
The PPF compensation cap is used to determine the level of compensation payable by the PPF to certain individuals. It is subject to an annual review with effect from 1 April to reflect the increase in the general level of earnings in Great Britain since the previous tax year.
On 8 February 2018, the PPF released updated age-specific compensation cap factors. These should be used for calculations of PPF compensation, as well as for valuations under section 143 (used to determine whether a scheme should enter the PPF following an insolvency event) and section 179 (a scheme’s funding position on the PPF basis) with effective dates from 1 April 2018.
The PPF has published updated guidance and a factsheet on the Fraud Compensation Fund (“FCF”). The FCF was established under the Pensions Act 2004 to provide compensation to occupational pension schemes, with insolvent employers, that suffer a loss that can be attributable to an offence involving dishonesty.
On 8 February 2018, the PPI published Briefing Note 105, The impact of the introduction of automatic enrolment on future generations. The Note considers the impact of the introduction of automatic enrolment on younger people and future generations, particularly the cohort of workers entering the workforce who may be automatically enrolled in to pension schemes for their entire working life.
The note highlights the change in participation brought about by automatic enrolment, and uses case study projections to consider the types of outcomes for individual millennials.
TPR has fined the trustees of an international airline’s pension scheme, for failing to get accounts audited on time for two years in a row. Trustees or scheme managers of most pension schemes are legally required to obtain audited accounts and an auditor’s statement about contributions every year.
The requirements were not met by the deadline in either 2015 or 2016, and no reasonable excuse was given. Four trustees were therefore fined £500 each.
It is the first time that TPR has used its fining power under section 10 of the Pensions Act 1995 to enforce against a scheme for this type of governance failure.
The decision was made by TPR’s Determinations Panel, which found that the trustees had treated their obligations as a “low priority”, even after the scheme’s actuary highlighted the problem to TPR in a breach of law report in November 2016.
Executive Director of Frontline Regulation Nicola Parish said: “We will take action if we believe members’ benefits are at risk from failures in a scheme’s governance and administration. Obtaining audited annual scheme accounts is a statutory requirement and a fundamental aspect of good governance. Failure to obtain audited accounts can hinder a scheme’s ability to obtain a valuation and can also be an indication of wider governance failings.”
Fines have been issued in what was TPR’s first prosecution for failing to give staff workplace pensions.
A bus company was prosecuted for failing to comply with the law on automatic enrolment (an offence under section 45 of the Pensions Act 2008), and the managing director was 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).
In the Magistrates’ Court, the company was ordered to pay a £27,000 fine, £7,400 costs and a £120 victim surcharge, with the director ordered to pay a £4,455 fine and a £120 victim surcharge. This came on top of £14,400 in civil fines that the employer already owed for failing to comply with the law on automatic enrolment.
Darren Ryder, TPR’s Director of Automatic Enrolment, said “This case shows the cost to employers that failing to comply with automatic enrolment can bring – a bill of tens of thousands of pounds, a criminal conviction and a damaged reputation.”