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

HMRC publishes brief on deduction of VAT on pension fund management costs

On 26 October 2015, HMRC issued Brief 17/15 (on the deduction of VAT on pension fund management costs), setting out its latest position regarding the recoverability of VAT on professional fees paid in respect of occupational pension schemes (see our Alert dated 17 December 2014 for more on the position to date).

Brief 17/15 confirms HMRC’s position regarding the use of tripartite agreements as a means of recovering VAT, and looks at alternatives, including the possibility of trustees supplying scheme administration services to an employer and “VAT grouping”. In addition, it addresses the corporation tax implications of tripartite contracts.

Crucially, it also announces a 12 month extension to the current transitional arrangements, which means that the VAT treatment outlined in Notice 700/17 can continue to be used until 31 December 2016.

For further details on Brief 17/15, see our forthcoming Alert.

HMRC publishes flexible payments from pensions statistics

HMRC published statistics on 28 October 2015 on the number of flexible payments made from private pensions, the number of individuals who have received a flexible payment and the total value of all flexible payments reported to HMRC since the new pension freedoms came into force on 6 April 2015.

In the second and third quarters of 2015, a total of 251,000 flexible payments were made to 146,000 individuals, with a total value of £2,720 million (figures rounded to the nearest 1,000, or £10 million). As HMRC notes, numbers published for 2015/16 may not be comprehensive, as reporting is currently optional. Reporting will become compulsory from April 2016.

HMT set to respond to tax consultation in 2016 Budget

At HMT questions on 27 October 2015, the Chancellor announced that the broad consultation on pensions tax (launched at this year’s summer Budget – see our Alert: Summer Budget 2015 (8 July 2015), is “completely open and a genuine Green Paper”.

Having received “a lot of interesting suggestions on potential reform”, HMT plans to respond fully to the consultation in the 2016 Budget.

House of Commons Library publishes briefing papers

On 23 October 2015, the House of Commons Library published a briefing paper on women and pensions, looking at the issues affecting state and private pension outcomes for women, including the changes to the State Pension and State Pension age, and the particular challenges facing women pension savers.

The Library published a further briefing paper on 27 October 2015, looking at the way in which forming a civil partnership or entering into a same sex marriage affects rights to state, occupational and personal pensions. The paper examines the relevant legislation, considers the potential for further reform, and references the recent Walker judgement.

Finally, on 30 October 2015, the Library updated their briefing paper on the new single-tier state pension being introduced for future pensioners from 6 April 2016, which references the Work and Pensions Committee inquiry (see below), and looks at the development of the proposals for a single-tier State Pension.

LGPS Funds statistics for England and Wales 2014/15 published

On 28 October 2015, the DCLG published details of the LGPS Funds in England and Wales in 2014/15. The statistics look at information on scheme income, expenditure, membership and retirements. The latest figures reveal that in 2014/15, LGPS expenditure on benefits was £8.3bn in England and £587m in Wales, representing increases of 5.4% and 8.9% respectively on the 2013/14 figures.

TPR publishes Trustee Landscape quantitative research

On 28 October 2015, TPR published the results of the Trustee Landscape quantitative survey (carried out by OMB Research on its behalf) into the skills and knowledge of pension scheme trustees and their boards in the context of recent reforms in pensions.

The research is part of TPR’s ongoing work to consider what more can be done to improve outcomes for savers and clarify duties for those running or supporting schemes. By publishing the research, TPR hopes to stimulate constructive debate about how the pensions industry at large can raise standards sufficiently to increase consumer confidence.

800 trustees were surveyed. Amongst the findings were that larger schemes are more likely to be well governed than small and medium schemes, with more training opportunities, greater access to advisers and more time to spend on their duties. The findings also suggest that, in general, DB schemes are better governed than DC schemes, and that schemes used for automatic enrolment show higher levels of engagement.

While half of schemes report that all trustees meet TPR’s minimum standards for knowledge, 15% of schemes indicated that no trustees met these standards. And while trustees generally believed that they had sufficient training opportunities, only half of schemes reported that any of their non-professional trustees had undertaken formal training in the last year.

Lesley Titcomb, Chief Executive of TPR, said that it was “only right” that TPR increase their focus on the competency and capability of trustees and the structure of trustee boards. She stated that TPR is “asking how [it] can further support trustees in fulfilling their important role. While many are doing a good job, there are some concerning findings, such as gaps in investment knowledge and the confidence to apply such knowledge, so we need to do more work to decide how best to address this. I want to have an open debate with the industry about what we all think an effective 21st Century trustee should look like, and how we get there.”

TPR is undertaking further research to explore the issues in more depth, focussing on areas such as the structures and processes that promote the effective operation of trustee boards, including the role of the Chair, and the best way to deploy training and support tools to achieve effective trusteeship across schemes of all sizes and benefit structures.

TPR releases automatic enrolment compliance data

TPR published its latest quarterly figures in October 2015, showing that compliance with automatic enrolment duties continues to be the norm. The update provides information about cases reviewed by TPR and the circumstances in which it has used its powers related to automatic enrolment and associated employer duties.

During the period 1 July and 30 September 2015, TPR closed 497 cases, bringing the total number of cases reviewed and closed since the start of automatic enrolment to 3,782.

The bulletin also notes that according to TPR’s research, the majority of employers nearing their staging dates had started to prepare, with awareness and understanding of automatic enrolment increasing among small and micro employers. However, TPR expect to see a rise in the number of times they need to use their powers over the next 12 months, as 500,000 new employers go through automatic enrolment.

TPR issued a press release alongside the bulletin on 29 October 2015, entitled “Prepare early to avoid the risk of a fine: Don’t ignore the workplace pension”. Executive Director of Automatic Enrolment, Charles Counsell, urges employers to allow time to understand how the law applies to them and avoid enforcement action: “Employers can avoid triggering a Compliance Notice by following the clear step-by-step information we provide on our website. […] My message to employers is get your plans in place early, meet the deadline to complete a declaration to let us know how you have met your duties. Don’t ignore workplace pensions and risk a fine.”

The quarterly bulletin also includes figures detailing the number of challenges by employers of TPR’s use of statutory powers.

Work and Pensions Committee launches inquiry into new State Pension

On 27 October 2015, the Work and Pensions Committee announced that it is launching an inquiry into the new State Pension which is being introduced from 6 April 2016.

This follows concerns that many of those who will be affected do not know enough about the changes or exactly what they will mean for their pensions. The Committee invites written evidence on the way the Government has communicated the changes, and the issues people are facing in understanding the transition to the new State Pension.

The deadline for written submissions is 30 November 2015.