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 Act 2016 receives Royal Assent
- Firefighters’ Pension Scheme (Amendment and Transitional Provisions) (England) Order 2016 published
- DCLG publishes LGPS guidance
- DWP extends call for evidence on the evolution of NEST
- FCA to conduct work on pension arrangements with guaranteed income benefits
- HMRC re-publishes October 2015 Brief on deduction of pension fund management costs
- HMT publishes further papers in relation to the LISA
- NEST publishes retirement income options research
- Retirement Quality Mark launched
- PPF consults on actuarial assumptions
- PPF compensation cap – increase for long service
- Corporate Governance inquiry launched
- TPAS publishes annual review
- TPAS launches pension tracing service
The Finance Act 2016 received Royal Assent on 15 September 2016.
- the Act includes provisions relating to the reduction of the LTA from £1.25 million to £1 million with effect from 6 April 2016
- transitional protections, in the form of “fixed protection 2016” (FP16) and “individual protection 2016” (IP16), are also introduced with effect from 6 April 2016 to help individuals whose pension savings are already at or around the £1 million mark
- the Act also sets out a number of technical changes to the pensions tax rules which aim to ensure that they operate as intended following the introduction of the DC retirement flexibilities in 2015.
For further details, please see our Alert.
The Firefighters’ Pension Scheme (Amendment and Transitional Provisions) (England) Order 2016 was laid before Parliament on 8 September 2016, and will come into force on 30 September 2016.
The Order removes the obligation on firefighters to pay contributions for the period after they have attained the maximum permissible pension entitlement until they reach age 50, the minimum age to draw benefits. The change takes effect with retrospective effect, from 1 December 2006. The Order also makes provision for the repayment of any such contributions that have been paid between 1 December 2006 and 30 September 2016.
On 15 September 2016, the DCLG published guidance for administering authorities in the LGPS. The guidance is aimed at assisting administering authorities in the formulation, publication and maintenance of their investment strategy statement, as required by the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016.
The DWP announced on 16 September 2016 that it is extending its call for evidence on the evolution of NEST. The paper seeks views on how NEST might develop to respond to the changing pension landscape. Questions being posed in the consultation include:
- should NEST be able to develop and offer a range of decumulation services for its members?
- once automatic enrolment has fully rolled out, should access to NEST be more flexible?
- what would be the impact on individuals, employers, NEST and other pension providers of the above?
The consultation will now end on 5 October 2016, instead of 28 September 2016.
The FCA published its September “Regulation round up” on 15 September 2016.
Amongst other things, the update notes that the FCA intends to look more closely at pension arrangements with guaranteed income benefits, stating that, since the introduction of pension freedoms it has “seen an increase in customers with guaranteed income benefits in their pension arrangements giving them up to take alternative benefits”.
The FCA is concerned that customers may not fully understand the nature and value of the guarantees they are giving up. Therefore it intends to conduct work to review the adequacy of firms’ customer communications “in non-advised sales propositions and oversight activity”. It will also look into what communications firms make to customers with guaranteed income benefits ahead of the proposed introduction of the secondary annuities market.
In the light of its announcement on 5 September 2016 that the transitional period in relation to the deduction of pension fund management costs was being extended, HMRC has re-published Revenue & Customs Brief 17 (2015).
The Brief was originally issued in October 2015. The updated version confirms the extension of the transitional period, allowing the VAT treatment outlined in Notice 700/17 to continue to be used, until. 31 December 2017.
On 15 September 2016, HMT published a technical note which confirms the design of the Lifetime ISA (“LISA”) following detailed discussions with the industry. It provides an update to a technical note published at the Budget 2016.
At the same time, HMT published a policy paper, Lifetime ISA – explained. This factsheet provides an explanation of how the LISA will work, updating an earlier paper published in March 2016.
On 16 September 2016, NEST published research into savers’ attitudes towards retirement income options. Ignition House, on behalf of NEST, conducted qualitative research with savers from across the country who are approaching retirement to discover what retirement income options they were looking for. The research focused on basic rate tax payers with DC pots between £20,000 to £50,000.
The research revealed “significant support for the development of new retirement products that combine flexibility, security, and ‘rainy day’ cash, even for those with smaller pots”. The research also confirmed that savers “worry about doing the ‘right thing’, and don’t feel confident about taking on the responsibility of making complex decisions throughout their retirement”.
Otto Thoresen, Chair of NEST Corporation, commented: “There’s clearly an appetite for products that will provide flexibility but don’t require lots of complex decisions by consumers. The challenge is how to provide this at low cost to people with small pots.”
The RQM is an independent accreditation for “at-retirement” products. To receive the RQM, a product needs to have demonstrated “through a rigorous assessment process, that it goes beyond the statutory and regulatory minimums, and meets a set of standards that sets the product apart as being of high quality”.
Joanne Segars, PQM Executive Director and Chief Executive of the Pensions and Lifetime Savings Association, commented: “Savers and those guiding them need help to understand what good looks like in this new breed of retirement income products. They need reassurance that high quality governance will focus on value-for-money, there is an appropriate default investment strategy in place, and that savers will receive high quality communications throughout their retirement. We believe that developing a set of clear and recognisable quality standards for retirement income solutions that people can trust will help product providers to develop the type of products savers need and help savers to make sense of the new choices they face.”
The PPF has published a consultation proposing changes to the actuarial assumptions used in s179 and s143 valuations. By law, the PPF has to set its valuation assumptions to reflect pricing in the bulk annuity market.
The most significant changes proposed are:
- using separate discount rates for pensioners and non-pensioners post retirement
- using yield indices that have durations that better match average liability durations, including the introduction of a new index-linked gilt yield
- updating the mortality assumptions.
Responses to the consultation should be submitted by 31 October 2016, the intention being that changes will be introduced from December 2016.
On 15 September 2016, the DWP published a consultation on draft legislation relating to the introduction of a new PPF compensation cap for those with long service, on and from 6 April 2017.
The main purposes of the consultation are to establish whether the draft regulations achieve their purpose, whether the long service cap operates appropriately and that all necessary changes have been identified. Current compensation payments will be recalculated to take account of the new long service cap but there will be no backdating.
The consultation closes on 9 November 2016.
According to a statement made to Parliament on 15 September by Richard Harrington, Parliamentary Under Secretary of State for Pensions, the FAS cap will also be amended in a similar manner from April 2018.
For further details, please see our Alert.
On 16 September 2016, the Business, Innovation, and Skills (BIS) Committee launched an inquiry on corporate governance, focusing on executive pay, directors’ duties, and the composition of boardrooms, including worker representation and gender balance in executive positions.
The BIS inquiry follows on from the corporate governance failings highlighted by the Committee’s recent inquiries into BHS and Sports Direct, and in the wake of commitments from the Prime Minister to overhaul corporate governance.
The Committee is seeking written submissions by Wednesday 26 October 2016.
TPAS published its annual review for the 2015/16 year, on 16 September 2016.
The report notes that last year the service helped 175,000 customers through its national helpline (up 42% on the previous year), online webchat facility (with an increase of 63% on the previous year), and website enquiry form and dispute resolution services – a 73% increase in total. Over 2,700,000 people visited its website.
Michelle Cracknell, Chief Executive, TPAS noted that “Whilst we saw a huge growth in the number of customers contacting our service, it is still only a fraction of the people that need help with planning their retirement income. There is still much work that needs to be done, to make sure that people are equipped to take responsibility for ensuring they have sufficient income in retirement. People need to be moved from being recipients of pensions to consumers of pensions. To do this, we need to build on the growing interest in pensions and make it a social norm for people to seek pensions guidance, not just at retirement, but regularly throughout their lives.”
On 12 September 2016, TPAS announced the development of a new ‘trace a lost pension’ tool available on its website. The tool aims to help customers understand whether a pension is likely to be due to them and gives them tips on what they can do to find them. It also explains how TPAS may be able to help.
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