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 fast-tracked to Royal Assent
- Pension Schemes Act receives Royal Assent
- Response to consultation on draft Contracting-out (Transfer and Transfer Payment) Amendment) Regulations 2017 published
- Centre for Policy Studies publishes policy proposals ‘manifesto’
- Flexible Payments from Pensions: April 2017
- House of Commons Library briefing papers published
- PPF confirms plans to raise Fraud Compensation Levy in 2017/18
- TPR publishes blog on corporate plan
- TPR publishes regulatory intervention report
The Finance Bill 2017 received Royal Assent on 27 April 2017 after being fast-tracked through its remaining readings, ahead of the dissolution of Parliament on 3 May 2017 and the General Election on 8 June 2017. The Government published the amendments to the Bill at this stage in the Committee of the Whole House of Commons.
To enable the Bill to be passed in the time available, several clauses of the Bill were cut, including:
- the reduction of the money purchase AA (“MPAA”) to £4,000. The MPAA, which applies to individuals who have accessed their pension savings flexibly, remains at £10,000 for now
- the Bill also originally contained provisions allowing employers to pay for individuals to take relevant pensions advice, or reimburse individuals for the costs of such advice, without any liability for income tax, provided that the payment did not exceed £500 in a tax year. This change was due to allow advice on general financial and tax issues relating to pensions, as well as general pensions advice – the current income tax exemption is limited solely to pensions advice and is capped at £150. However, this measure has also been cut, meaning that for now, the current exemption and its limits still apply. For clarity, this should not be confused with the Pensions Advice Allowance, under which members can take up to £500 in any given tax year (up to a maximum of three times in total) from their DC pension savings to pay for financial advice. This provision was introduced by Regulations with effect from 6 April 2017.
The Government has said that it intends to legislate for the omitted provisions “at the earliest opportunity” at the start of the new Parliament.
Amendments were also made to provisions that were retained. The Government’s Explanatory Notes and Notes on Resolutions explain a number of changes made to the provisions on overseas pensions (including Section 615 schemes), offshore transfers and the “overseas transfer charge”, and to optional remuneration arrangements (salary sacrifice).
The Pensions Schemes Bill 2017 (“the Bill”) received Royal Assent on 27 April 2017 and is now the Pension Schemes Act 2017 (“the Act”). The Act’s primary aim is to provide for the greater regulation of master trusts. Among other things, the Act will:
- introduce an authorisation regime for master trusts which provide DC benefits (whether alone or in conjunction with other benefits)
- require master trusts to demonstrate to TPR that they meet certain key criteria on establishment (or, for existing master trusts, when the relevant provisions are brought into force)
- give TPR new supervisory powers to authorise and de-authorise master trusts according to strict criteria, ensuring that master trusts continue to meet the required standards throughout their existence
- introduce specific trustee requirements on wind-up or closure of master trusts
- make provision for regulations to be laid to introduce further measures on administration charges (the cap on early exit charges and the ban on member-borne commission charges).
Much of the detail of the new regime is due to be set out in regulations. We understand that the Government intends to consult on policy this autumn, with draft regulations to follow in early 2018. Whether this will continue to be the case following the General Election remains to be seen.
For details, please see our Alert.
Response to consultation on draft Contracting-out (Transfer and Transfer Payment) Amendment) Regulations 2017 published
On 26 April 2017, the DWP published the Government’s response to its consultation on the draft Contracting-out (Transfer and Transfer Payment) (Amendment) Regulations 2017. The regulations were laid before Parliament on the same day.
The two-week consultation sought views on draft regulations to introduce changes to enable transfers, in limited circumstances, of pensioner members with GMP or section 9(2B) rights, with their consent, to schemes that have never been contracted-out.
The transfers will only be permissible in limited circumstances where schemes are in financial difficulty – where the scheme is undergoing a PPF assessment or where a regulated apportionment arrangement has been entered into.
The Government restates in the response its intention to consider “extending the transfer of pensioner members to new schemes more generally in the near future together with bulk transfers that are made without member consent”.
The regulations are due to come into force on 3 July 2017
The Centre for Policy Studies published a paper on 2 May 2017 entitled A Pensions and Savings Manifesto, which aims to outline some pensions and savings related policy proposals “for political parties to consider for their General Election manifestos”.
HMRC published updated statistics on 26 April 2017, in relation to the number and value of flexible payments made from pension arrangements since the ability to access benefits flexibly was introduced in April 2015.
The figures show that 1.9 million payments have been made since the pension freedoms were launched, with 176,000 people accessing £1.59 billion flexibly from their pension pots over the first three months of 2017. This brings the total amount of money withdrawn from pensions to £10.8 billion since April 2015.
The House of Commons Library published a briefing paper on 25 April 2017 looking at the rules for deferring a state pension and how they have developed over time.
On 27 April 2017, a briefing paper considering the “triple lock” used to uprate the state pension, and the arguments for and against it, was also published.
The Fraud Compensation Fund (“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.
The FCF is funded from the Fraud Compensation Levy. This levy is raised, when appropriate, from all UK DB and DC pension schemes.
The PPF, which runs the FCF, has announced that it will raise a Fraud Compensation Levy in 2017/18 – the first time in five years. The PPF notes that it has been notified of a number of possible claims which may come to the FCF in the next few years. Therefore, in order to smooth the impact on schemes over time, it will raise a levy of 25p per member (the same as in 2012/13). The levy is expected to raise around £5 million in total.
The levy is collected by TPR alongside the general levy. The collection process began on 1 April 2017.
On 26 April 2017, TPR published a blog on its recently released corporate plan for 2017-20. In the blog, Helen Aston, Executive Director of Finance and Operations, discusses TPR’s priorities and focus areas for the next three years. She notes that TPR knows that the regulator it wants to be “– and that the majority of our stakeholders want to see – is clearer, quicker, and tougher. We’ve already made inroads and we’ll be saying much more about other changes later in the summer”.
TPR issued a press release on 27 April 2017, warning pension savers, trustees and administrators of “the danger of rogue individuals using scamming techniques, after taking action to prohibit the trustees of 5G Futures Pension scheme”.
A regulatory intervention report confirms that two individuals have been prohibited from being trustees of pension schemes with immediate effect on the grounds that “neither are a fit or proper person to hold the position, citing a lack of integrity, competence and capability”.
TPR found that the trustees of 5G Futures Pension scheme showed serious disregard of some obvious risks to members from the scheme’s investments, with other concerns including potential scheme members being cold called by introducers, paid on commission by the scheme.