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

Automatic enrolment thresholds for 2016/17 – updated draft Order published

As we reported in 7 Days on 8 February 2016, the draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2016 sets out the new “upper earnings limit” for the automatic enrolment qualifying earnings band. This will be £43,000, up from £42,385 in 2015/16.

A revised version of the Order has been published today (15 February 2016), which makes minor (non-substantive) changes to the draft.

The Order is due to come into force on 6 April 2016.

HMT: Response to consultation on pension transfers and early exit charges

On 10 February 2016, HMT published a response to its consultation on options to address possible barriers to people switching their pensions to access the new DC freedoms.

The response confirmed the following:

  • The Government will place a new duty on the FCA to limit early exit charges. This duty will be introduced in the Bank of England and Financial Services Bill, which amends FSMA 2000.
  • To ensure similar protection, the requirements will be mirrored for trust-based schemes.
  • TPR will introduce new guidance for scheme trustees to help ensure transfers are processed promptly and accurately.
  • The Government intends to make trust-based schemes “more transparent and accountable for their performance in processing transfers” through a new reporting regime.
  • Pension Wise will develop additional guidance on pension transfers in order to support individuals through the process.
  • The Government has decided to delay action on the advice requirement until the outcome of the Financial Advice Market Review; its proposals are due ahead of the 2016 Budget.

The FCA will consult on the level of the proposed exit charge cap shortly, with a view to implementation before the end of March 2017.

Please see our Alert for further details.

House of Commons Library papers published

The House of Commons Library published a briefing paper on 12 February 2016, which looks at recent measures to restrict pension tax relief.

This sits alongside a paper published on the same date, which reviews the current debate on pension tax relief reform, and looks at three approaches: retaining the current system (with slight modifications), or moving either to a single rate of tax relief, or to a taxed-exempt-exempt (“TEE”) system. This comes ahead of the Government’s response to their consultation on “strengthening the incentive to save”, which is expected to be announced in the 2016 Budget.

On 10 February 2016, the Library published a report entitled “Equitable Life: further compensation debate”, which summarises the history behind the continuing campaign for more compensation for Equitable Life policyholders. The paper deals with the issue of compensation, and not with the causes of Equitable Life’s failure (these are dealt with in other documents). EMAG – the Equitable Members Action Group, the main Equitable Life policyholders’ action group – believes that the compensation to date has been insufficient, and as at February 2016, called for another £2.7billion of compensation. The most recent Commons debate was on 11 February 2016.

Public Sector Pensions: Funding approval following the Milne determination

Back in May 2015, the PO issued his Determination in a case brought by Mr Milne, a retired Scottish firefighter, against GAD (see our 7 Days of 18 May 2015, and 1 September 2015). The Determination found GAD guilty of maladministration in failing to update the factors used in the calculation of firefighters’ lump sum pension payments. The Government determined that the principles of the ruling should be applied to other affected individuals across the UK, including around 21,000 retired police officers in England and Wales.

GAD had given its assurance that appropriate redress would be paid, and had prepared calculations and guidance for affected schemes to enable scheme administrators to review each case.

On 5 February 2016, Mike Penning (The Minister of State for Policing, Crime and Criminal Justice), issued a Commons Written Ministerial Statement entitled “Funding to Police Forces in England and Wales to Meet the Costs of Redress Payments to Former Police Officers Affected by the Determination of the Pensions Ombudsman of 13 May 2015 in the Case of Milne v the Government Actuary’s Department”.

The recent statement notes that Parliamentary approval for additional capital of £360m will be sought for the redress payments. Pending that approval, urgent expenditure will be met by repayable cash advances from the UK Government’s Contingencies Fund.

Public Sector Pensions: Consultation on reform of Civil Service Compensation Scheme published

On 8 February 2016, the Government launched a consultation seeking views on reforming the Civil Service Compensation Scheme (CSCS) while continuing to ensure any early access to pension provisions remains appropriate.

In the Autumn Statement 2015 and Spending Review, the Government announced that it intended to consult on further “cross-public sector action” on exit payment terms (following their earlier consultation on public sector exit charges). Published jointly by the Civil Service and Cabinet Office, this consultation forms part of that review.

The consultation looks at reforming the CSCS, while meeting the following principles:

  • aligning with wider compensation reforms proposed across the public sector, including the Government’s manifesto commitment to prevent excessive payouts by ending six figure exit packages
  • supporting employers in reshaping and restructuring their workforce to ensure it has the skills required for the future
  • increasing the relative attractiveness of the CSCS for staff exiting earlier in the process, and to maintain flexibility in voluntary exits to support this aim
  • creating significant savings on the current cost of exits and ensure appropriate use of taxpayers money
  • ensuring any early access to pension provisions remains appropriate

The consultation closes on 4 May 2016.