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 publishes factsheet guidance for employers and pension trustees
- FCA finalises guidance on streamlined advice and consolidated guidance
- HMRC publishes Countdown Bulletin issue 28
- HMRC pension schemes newsletter 91 published
- ONS publishes Occupational Pension Schemes Survey 2016
- PLSA publishes DB Taskforce’s final report
- PQM launches Good Communications Guide
- Pension Protection Fund announces Levy Estimate 2018/19
- PPI report on policies for increasing long-term saving of the self-employed
- TPR publishes blog on new data protection rules
- TPR reminds new businesses of automatic enrolment duties
On 28 September 2017, the FCA and TPR published a joint guide for employers and trustees on providing support with financial matters without needing to be subject to FCA regulation.
The factsheet had been published for consultation in April 2017, after guidance was recommended by the FCA’s Financial Advice and Markets Review (“FAMR”), which recognised “that the workplace can play an effective role in assisting consumers to make sound financial decisions”.
The publication aims to increase the efficacy of the workplace in supporting consumers on the financial aspects of their lives, by clarifying the types of advice that an employer or pension scheme trustee may give, as well as the advice which they should not give. The factsheet also provides practical examples, and signposts resources that may be helpful to employers and trustees regarding the type of support they might offer to employees and pension scheme members on financial matters.
On 28 September 2017, the FCA published finalised guidance on “streamlined advice and consolidated guidance”. This guidance aims to address some of recommendations made by the FCA’s FAMR to tackle the barriers to consumers in accessing advice and guidance.
The guidance is aimed primarily at firms or individuals providing, or considering providing investment advice, in particular streamlined models. It includes examples of information required for various streamlined advice scenarios (including in relation to workplace pensions, annuity purchase, and pension accumulation).
On 29 September 2017, HMRC published issue 28 of its “Countdown Bulletin”, which provides important information about the ending of contracting-out.
This latest edition of the bulletin includes information on:
- State Scheme Premium Payments
- accepting late expressions of interest to register for the Scheme Reconciliation Service (“SRS”)
- differences in GMP calculations between the GMP checker service and following a request for re-runs of SRS data.
Pension schemes newsletter 91 was published by HMRC on 29 September 2017. Among other things, it includes:
- a final reminder on the submission of annual returns of individual information for 2016/17
- administrative information relating to the move to the new pensions online service
- the launch of the lifetime allowance scheme administrator look-up service
- information on reporting overseas transfers charges
- a reminder of the deadlines for annual allowance pension savings statements and charges.
On 28 September 2017, the ONS published its UK Occupational Pension Schemes Survey for 2016. This survey considers the nature of occupational pension provision in the UK by providing summary data on membership of schemes and contributions paid.
The survey found that in 2016:
- total membership of occupational pension schemes in the UK was 39.2 million, the highest level recorded by the survey, representing an increase of 17.1% compared with 2015 (33.5 million)
- active membership of occupational pension schemes was 13.5 million, split between the private (7.7 million) and public (5.7 million) sectors
- active membership of private sector DC schemes was 6.4 million, representing an increase of 62.5% on 2015 levels (3.9 million)
- for private sector DC schemes, the average total (member plus employer) contribution rate was 4.2%, broadly comparable with 2015.
According to the DB Taskforce, over two-thirds (77%) of employers believe that there are challenges to running DB schemes, including “underfunding, weak employer covenants and lack of scale”. The Taskforce therefore investigated a range of potential options aimed at helping schemes improve their performance and the probability of members seeing their benefits paid in full.
In its final report, the DB Taskforce makes three main recommendations:
- “Chair’s statements” for DB scheme trustees: with a view to encouraging schemes to meet the highest standards, trustee chairs could be required to produce an annual statement (within the scheme’s annual report and accounts) to demonstrate to TPR and their members that they are operating in line with best practice in areas such as governance, investment performance and cost transparency
- making it easier to standardise and simplify benefits: the report notes that, between them, the UK’s 6,000 DB schemes manage tens of thousands of different benefit structures. The Taskforce suggests that this is costly to administer, confusing to members and a barrier to improving efficiency. It is therefore of the view that schemes would benefit from Government action to make it easier to simplify these structures whilst retaining actuarially equivalent benefits for members
- exchanging employer covenants for scheme funding: the report proposes new measures to help schemes, in particular those backed by employers with weaker covenants. The Taskforce envisages schemes being able to exchange the potentially uncertain promise of future support into tangible funding, through stronger and more secure backing from a larger sponsor. It suggests that employers could be released from their obligations if scheme assets and liabilities are transferred into new pension scheme consolidators, referred to in the report as “Superfunds”. Superfunds are not the only method of consolidation which the PLSA has focused on. It set out the benefits of consolidation of different types (single trustee, asset pooling, shared services and full merger) more widely in its second report, The Case for Consolidation, and these options continue to be discussed by the pensions industry as well as Superfunds.
The report notes that for any of these options to be viable, the DWP, TPR and the Pensions industry would need to work together to investigate how they could be implemented.
The Pension Quality Mark (“PQM”) has launched its Good Communications Guide. The first three chapters of the guide were launched on 29 September 2017, with the remainder due to be presented at the PLSA Annual Conference in Manchester between 18 and 20 October 2017.
The Guide is aimed at bringing together ideas and approaches to help those wanting to improve pensions communication and engagement.
PQM Chairman Gregg McClymont suggested that the nine chapters of the guide could be used “either individually to solve a specific challenge or as a map to allow a pension scheme or provider to undertake an overhaul of communications more broadly.”
Baroness Ros Altmann, who contributed to the guide, said “The guide combines practical information and best practice tools with the aim of helping pension schemes and providers improve the way they communicate with pension savers. It offers support to those who share our passion to improve standards across the pensions industry. The huge advantages of pension saving are poorly understood and I hope better communication can improve the image of pensions and ultimately enrich more people’s lives.”
The guide is rounded off with a lawyer’s perspective, presented by Sackers’ partner and head of DC, Helen Ball. Helen sets out the six key things to know about legal obligations and communications, noting that schemes should use their lawyers “wisely, at the beginning and end of a project, to ensure you set out on the right track and that the ultimate communication ticks the boxes from a regulatory and legislative perspective.”
On 27 September 2017, the PPF announced that it had chosen to set its levy estimate at £550 million for 2018/19 – just over 10% lower than the £615 million estimate for 2017/18. The PPF expects one in five schemes to see an increase to their levy payments, with the majority seeing a reduction.
Alongside this announcement, the PPF confirmed that it will implement the majority of proposals consulted on in March 2017 for the third levy triennium with limited changes. It is now is seeking views on a small number of additional proposals, including improvements to its assessment of scheme underfunding.
The consultation on the new proposals and the draft levy rules for 2018/19 will run until 1 November 2017. The PPF aims to finalise the rules and publish the levy determination in December 2017.
David Taylor, General Counsel at the PPF, commented: “When we set out our initial proposals for the next three years we noted the particularly challenging environment in which the PPF is operating. Six months on, a high degree of political and economic uncertainty persists and scheme deficits remain high. However, while the risks we face are significant, we’re in a strong financial position and we’re still on track to meet our long-term funding target. As a result, we’re been able to set a levy estimate for 2018/19 that is 10 per cent lower than last year. In doing so we have, as always, sought to recognise levy payers’ desire to limit costs while maintaining an appropriate level of protection given the risks we face.”
Please see our forthcoming Alert for further detail.
The PPI has published a report looking at recent trends in self-employment to consider alternative policy options for increasing the long-term savings level of the self-employed, with the intention that the output feeds into the Government’s 2017 automatic enrolment review. The report constructs a picture of the self-employed, their characteristics and savings levels based upon quantitative analysis of data. Three different policy options which could meet the various needs of the self-employed, along with the potential impact each could have, are explored:
- defaulting in: an automatic enrolment style system for the self-employed
- maintaining workplace pensions: transition from workplace pensions to individual/personal pensions
- alternative products: engaging the self-employed with alternative products for long-term saving, such as Lifetime ISAs.
TPR has published a blog considering “Why pension schemes need to know about new data protection rules”. The blog has been written by guest blogger Matthew Burrell, senior policy adviser at the PLSA.
On 29 September 2017, TPR launched a new online suite of information and tools for new businesses in relation to their automatic enrolment obligations. Doing so, TPR reminded start-up businesses that they will, from 1 October 2017, have a legal duty to put staff into a workplace pension as soon as they employ them. Before 1 October 2017, all employers were given a date, known as a staging date, when their automatic enrolment duties would start, the last of which will be reached in February 2018. From 1 October 2017, new businesses will no longer receive a staging date.
The start of instant pension duties coincides with the fifth anniversary of automatic enrolment.
TPR’s Director of Automatic Enrolment Darren Ryder added: “The start of instant pension duties for new businesses will continue the great strides automatic enrolment has made to reverse the downward trend in workplace saving. Providing a workplace pension is now the business norm and staff expect to be saving into a pension as part and parcel of their employment”.
TPR states that it will also publish survey findings later in the autumn, showing that most of those who work with employers, such as accountants and independent financial advisers, are aware that new businesses will have instant pension duties.