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
- Pension Schemes Act 2021 receives Royal Assent
- Regulations on updated NIC amounts
- Brexit round up: EU proposes extending provisional application of the TCA, HMRC updates social security contributions guidance, TPR updates cross-border pension schemes guidance
- Briefing paper on frozen overseas pensions
- Government publishes consultation on increasing the normal minimum pension age
- IA publishes briefing on the Long-Term Asset Fund
- PASA publish GMP equalisation tax guidance
- Public sector exit payments cap switched off by HMT
- Sackers survey reveals transfers to DC master trusts will continue into 2021 and beyond
- TPR publishes podcast on pension scams
The Pension Schemes Act finally received Royal Assent on 11 February 2021. Key elements of the new Act include enhancing TPR’s powers, changes in relation to scheme funding, and new restrictions on statutory transfers. Whilst the bulk of the Act is largely unchanged from the Bill introduced into Parliament over a year ago (see our Alert), there are a few additions and changes to note (see our latest Alert).
Much of the detail, including the dates on which most of the provisions will come into force, remains to be fleshed out in regulations. Guidance on various elements is also expected.
The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2021 have been made, giving effect to the annual re-rating of various NIC rates, limits and thresholds for the purposes of calculating NIC liabilities for the tax year beginning 6 April 2021.
Brexit round up: EU proposes extending provisional application of the TCA, HMRC updates social security contributions guidance, TPR updates cross-border pension schemes guidance
The European Commission has proposed an extension to the provisional application of the Trade and Cooperation Agreement (“TCA”) until 30 April 2021. The TCA was initially applied on a provisional basis, and was due to expire on 28 February 2021.
On 12 February 2021, HMRC updated its social security contributions guidance for EEA and Swiss workers coming to the UK, and its NICs guidance for UK workers going to the EEA and Switzerland, to reflect that all EU member states have opted to apply the “detached worker” rules (where an employer which normally carries out its activities in one state (“home state”) sends an employee a short-term assignment (one not exceeding 24 months) to another state, contributions continue to be paid in the home state provided the employee is not replacing another detached worker).
TPR has updated its guidance for UK cross-border occupational pension schemes and UK employers that are contributing to occupational pension schemes established outside the UK. The guidance notes that the UK laws that previously governed cross-border pension schemes have largely been revoked, meaning that the previous legal regime “has changed significantly”. This change will impact occupational pension schemes that were previously authorised and approved to carry out EU/EEA cross-border activity. Affected schemes should take steps to comply with the law as it now stands, where relevant also checking guidance issued by other countries.
The House of Commons Library has published a new briefing paper on frozen overseas pensions, which looks at the policy of not uprating the UK state pension in some countries. State pensions paid to UK nationals who move to the EU, EEA or Switzerland from 1 January 2021 will continue to be uprated under the TCA’s protocol on social security co-ordination (see 7 Days).
On 11 February 2021, HMT published a consultation reconfirming the announcement that NMPA will rise from 55 to 57 on 6 April 2028 and seeking views on the proposed protection regime for pension scheme members (with the exception of members of the firefighters, police and armed forces public service pension schemes for whom the increase in NMPA will not apply).
The proposed regime will protect the pension age for members of registered pension schemes who, at the date of the consultation, have a right under the scheme rules to take pension benefits below age 57. A protected pension age will be specific to an individual as a member of a particular scheme and the proposed protection will apply to all the member’s benefits under the relevant scheme (ie not just those benefits built up before 2028). Where individuals are entitled to a protected pension age in relation to the increase in NMPA from 2028, they will be able to draw benefits under their scheme even if they are still working and they will not be required to take (crystallise) all their benefits under the scheme on the same date (by contrast with previous protection regimes for NMPA increases). Individuals will also retain their protection where they become a member of another pension scheme as a result of a block transfer. Schemes will be free to decide how and when to move to the new NMPA by 2028.
The consultation closes on 22 April 2021. The Government plans to publish draft legislation in summer 2021 and to legislate for the increase in NMPA in the subsequent Finance Bill.
The IA has published a factsheet on the Long-Term Asset Fund (“LTAF”) which is a new fund structure allowing wider access to assets such as infrastructure and private companies which are not regularly traded. It aims to provide the benefits of greater diversification for pension savers and investors, while helping to provide additional investment for the UK economy. The factsheet sets out why an LTAF is needed, who can invest, and asset types.
On 15 February 2021, PASA published GMP equalisation tax guidance (see our upcoming Alert). This further “good practice” guidance highlights tax issues which schemes may encounter in adjusting benefits to correct for the inequalities of GMPs and identifies possible approaches for dealing with those issues. The guidance is based on HMRC guidance published on 20 February 2020 (see our Alert) and 16 July 2020 (see 7 Days) and on PASA’s understanding of HMRC’s current view on the interpretation of the legislation governing taxation issues associated with the equalisation of GMPs.
The Restriction of Public Sector Exit Payments Regulations 2020, which came into force on 4 November 2020, cap exit payments at £95,000 for public sector authorities (and offices listed in the Schedule). After extensive review, the Government has concluded that the cap may have “unintended consequences” and the regulations should be revoked.
On 12 February 2021, HMT published Directions which disapplied parts of the exit cap regulations with immediate effect. HMT has also issued guidance on these Directions, which sets out its expectation that employers should pay the additional sums that would have been paid had the cap not applied, for employees who left between 4 November 2020 and 12 February 2021. The guidance confirms that the Government will revoke the exit cap regulations in due course and will legislate again to tackle unjustified exit payments.
According to a Sackers survey, transfers to DC master trusts are expected to continue well into 2021. The survey showed that 25% of respondents had already moved to a DC master trust, with 50% planning to either do so in the future, or at least signpost a DC master trust as a retirement option for their members.
Helen Ball, Sackers head of DC, commented: “These results do not come as a surprise. Originally, the move to a DC master trust was thought of as a wholesale move; transferring all of the members from one DC vehicle to another. However, recent experience, and our survey, have clearly shown that projects are becoming increasingly more sophisticated. A large range of different projects are now being considered, including transferring deferred members only, or DC sections of hybrid schemes to a DC master trust.”
TPR has published the first podcast in its new series “TPR Talks”. The podcast discusses the threat of pension scams and explains, among other things, that the pensions industry should, and can, do more to fight scams, including signing up to Pension Scams Industry Group (“PSIG”) and TPR’s Pledge to Combat Pension Scams and increase reporting of suspected scams.