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
- FCA and HMT publish FAMR progress report
- Publication of FCA corporate documents
- FRC consults on proposed revisions to Practice Note 15
- FSCS announces final levy for 2017/18
- Pensions Dashboard project launches prototype
- IFoA issues call for proposals on “modelling pension funds under climate change”
- House of Commons Library publishes briefing paper on Frozen Overseas Pensions
- PPI publishes Briefing Note 95
- TPR updates its automatic enrolment guidance
Back in March 2016, FAMR published its final report setting out 28 recommendations “to increase the accessibility and affordability of the advice and guidance that consumers want and need at all stages of their lives”.
The progress report sets out how the implementation of these recommendations has progressed, noting that “following continued commitment from the government, regulators and the Financial Advice Working Group, all recommendations have been completed or are on track to be completed”.
The FCA also published a consultation on guidance intended to clarify the regulatory framework. The guidance aims to address four of the recommendations made by FAMR in its final report, and to:
- support firms offering “streamlined advice” on a limited range of consumer needs
- provide clarity on the standard types of information required as part of the fact find process and set out key considerations for verifying a fact find that has been performed by third parties
- support firms offering services that help consumers making their own investment decisions without a personal recommendation
- along with TPR, provide a new factsheet that sets out what help employers and trustees can provide on financial matters without being subject to regulation.
Responses are required to section 4 (non-advised services) of the consultation by 23 May 2017, and to sections 2, 3 and 5 (streamlined advice, fact find and the factsheet for employers and trustees) by 11 July 2017.
The Financial Advice Working Group was established in June 2016, in response to the FAMR recommendations and is made up of a selection of consumer and industry experts from the FAMR Expert Advisory Panel, the Financial Services Consumer Panel, the FCA Smaller Business Practitioner Panel, and the FCA Practitioner Panel. It has now prepared two reports for HMT and the FCA, on improving the financial wellbeing of UK consumers, and on potential new terminology for “advice” and “guidance” with the aim of helping consumers to better understand these services when they take decisions about their financial future.
The FCA notes that continued commitment and co-operation will be needed to ensure the effectiveness of the FAMR measures, “not only from regulators and the government, but also employers, consumer groups and the financial services industry. The FCA and the Treasury will conduct a review of the outcomes from FAMR in 2019.”
On 18 April 2017, the FCA published a suite of documents:
- its Mission
- its Sector Views
- its Business Plan 2017/18
- its annual consultation on fees, and
- a feedback statement to its Mission consultation
Andrew Bailey, Chief Executive of the FCA, stated at the press conference for the publication of these documents, that “the social and economic implications of an ageing population, together with factors like continuing low interest rates and a rise in less secure forms of employment, are likely to have major implications for the pensions and retirement income sector. This Business Plan explains how we will encourage firms to address this growing need and ensure they provide consumers with the information they need to make suitable choices”.
The Business Plan confirmed that the FCA would publish an interim report on the Retirement Outcomes Review in summer 2017, followed by the final report at the beginning of 2018.
Chapter 13 of the FCA’s consultation on its 2017/18 regulated fees and levies sets out the proposed pensions guidance levy rates and pensions guidance providers’ levy rates. The consultation closes on 9 June 2017.
On 13 April 2017, the FRC launched a consultation on proposed revisions to Practice Note 15: The Audit of Occupational Pension Schemes in the UK. The revised version takes account of master trusts and the implementation of FRS 102, and includes material on pension scheme auditors’ responsibilities regarding statements of contributions and on liaising with scheme actuaries.
The consultation closes on 30 June 2017.
The FSCS has announced its final levy for 2017/18.
Chief Executive Mark Neale said: “The only substantial change to our 2017/18 forecast since January affects life and pension advisers. A fall in the average cost of SIPP-related claims means that we now forecast compensation costs next year of £146m, compared to a forecast of £163m in January”. 93% of the costs in the “life and pension intermediation” class arise from bad advice to move retirement savings from occupational pension schemes into a SIPP and to invest in risky or illiquid assets within the SIPP wrapper.
Although the levy on life and pensions advisers will remain unchanged at £100m, the FSCS will keep this under review and, if needed, will raise a supplementary levy later in the year to cover compensation costs above the £100m limit.
Mr Kirby confirmed plans to involve multiple pension dashboards, stating that “to realise the huge benefits of this technology, we cannot prescribe a single way for people to access their own data.”
He also noted that the dashboards would “only be viable and useful if a critical number of pension schemes step up to meet the data standards”. Therefore, he confirmed that he was discussing with the Minister for Pensions “to see how this might be made compulsory if schemes do not do so by choice”.
To coincide with the event, the Pensions Dashboard project is placing the data standards which sit behind the prototype in the public domain. These are technical documents which spell out exactly how data had to be presented by firms to connect successfully to the Pensions Dashboard prototype.
Rob Yuille, Head of Retirement Policy at the ABI, said: “While these standards will be developed, the industry should view them as a reliable guide to what’s likely to be expected of them when it comes to connecting to the dashboard. It’s important Government now lays out clear plans for the next phase of this project so industry, regulators and consumer groups can continue their valuable collaboration on how to make this service a reality.”
On 13 April 2017, the IFoA issued an invitation to research teams and organisations to submit proposals for a research project focusing on “modelling pension funds under climate change”.
The research will address the need for pensions actuaries to understand the potential impact of climate change, and the extent to which, and when, climate change might be relevant to the funding advice they give. The research will consider the impact on pension scheme liabilities as well as assets.
The House of Commons Library has published a briefing paper on “Frozen Overseas Pensions”, looking at why the UK state pension is not uprated in some overseas countries, the debates on this policy and the legal challenge made in the case of Carson.
On 12 April 2017, the PPI published Briefing Note 95 – “What difference does a year make?”. The Briefing Note examines how inequalities across the life course relate to paid work in later life in the UK. In particular, it looks at the impact on the working lives of two groups of people:
- women who take a career break; considering sensitivity to the timing and length of the period of their return to work following a career break
- men and women who exit the labour market early; considering sensitivity to the timing of their exit from the labour market before SPA.
The note is the last in a series undertaken in conjunction with “The Wellbeing, Health, Retirement and the Lifecourse project” – a research project investigating ageing, work and health across the life course. The project builds on an existing UK-Canadian collaboration examining life course influences on later life work trajectories across several European countries and the US. The interdisciplinary project team involves universities and partner organisations, including the DWP.
TPR has published an updated version of its detailed automatic enrolment guidance.
Changes have been made to several areas of the guidance, including an update to the qualifying earnings thresholds for the 2017/18 tax year, the addition of information relating to transitional period for schemes with defined benefits, and by covering the expansion of the statutory exceptions to automatic enrolment, to include the 2016 forms of tax protection (fixed protection 2016 and individual protection 2016). The guidance has also been updated to reflect changes made to the timing of planned increases in the minimum level of contributions required to be made to money purchase schemes, with the first scheduled rise being deferred from 1 October 2017 to 6 April 2018 and the second being deferred from 1 October 2018 to 6 April 2019.
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