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 (No. 2) Bill 2016/17
- Automatic enrolment earnings trigger and qualifying earnings band
- Changes to QROPS conditions
- Regulations on pensions advice allowance finalised
- Technical changes to contracting-out regulations
- New Bereavement Support Payment rules finalised
- DWP publishes response to consultation on GMP equalisation
- HMRC publishes pension schemes newsletter 85
- HMRC publishes draft guidance on financial advice paid for by an employer
- HM Treasury publishes response on reducing the money purchase allowance
- House of Commons Library publishes new briefing papers
- PLSA launches new guide on indices and benchmarks
- TPR provides more help for trustees and savers in the fight against pension scams
- TPAS: Ann Harris appointed as new permanent chair
The Bill had its first reading on 14 March 2017, at which the Budget motions, which will serve as the founding resolutions for the Bill, were agreed upon by the House of Commons. The dates for the next stages of the Bill have yet to be announced.
The Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2017 was made on 14 March 2017.
The Order confirms the upper and lower thresholds of the qualifying earnings band (for calculating contributions) for the 2017/18 tax year. These will continue to be aligned with NIC rates – £5,876 for the lower limit of the qualifying earnings band, and £45,000 for the upper limit.
The current automatic enrolment and re-enrolment earnings trigger of £10,000 remains unchanged for 2017/18.
The Order is due to come into force on 6 April 2017.
The Pension Schemes (Categories of Country and Requirements for Overseas Pension Schemes and Recognised Overseas Pension Schemes) (Amendments) Regulations 2017 are set to change the conditions for transfers to a Qualifying Overseas Pension Scheme (QOPS) or QROPS from 6 April 2017, so that:
- the 70% rule, which currently requires at least 70% of UK tax-relieved funds to be used to provide a member with an income for life, will be replaced with a requirement for those providing non-occupational pension schemes to be regulated in the country where the scheme is established, if the scheme itself is not regulated
- the “pension age test”, which requires that benefits paid out of UK tax-relieved funds can generally be paid no earlier than age 55, will be amended so that payments can be made before age 55 where they would be authorised if paid by a registered pension scheme (for example, a refund of excess contributions lump sum).
The Registered Pension Schemes (Authorised Payments) (Amendment) Regulations 2017, which will come into force on 6 April 2017, provide for the new pension advice allowance payment to be an authorised payment for the purposes of the Finance Act 2004, and set out the conditions which must be met.
The Occupational Pension Schemes and Social Security (Schemes that were contracted-out and graduated retirement benefit) (Miscellaneous Amendments) Regulations 2017 will implement a number of technical changes to existing regulations for former contracted-out schemes from 6 April 2017, including:
- extending the period for which Contributions Equivalent Premiums (CEPs) may be paid where a scheme has reconciled their records through HMRC’s scheme reconciliation service
- making consequential changes to add an entitlement to a “Bereavement Support Payment” to the circumstances in which a GMP can be paid to an earner’s survivor following the introduction of this new benefit (see below), and
- revising the fixed rate of revaluation of GMPs for those leaving pensionable service after 5 April 2017.
The regulations also make an addition to the legislation that provides for the calculation of a lump sum payment for individuals who, between April 1961 and April 1975, gained entitlement to Graduated Retirement Benefit under the old State Pension and who deferred claiming their State Pension.
The Pensions Act 2014 (Consequential, Supplementary and Incidental Amendments) Order 2017 has been laid before Parliament and will generally come into force on 6 April 2017.
The Order supports the introduction of a new social security benefit – the Bereavement Support Payment – and will replace the current range of bereavement benefits (Bereavement Payment, Bereavement Allowance and Widowed Parent’s Allowance). The Bereavement Support Payment is for surviving spouses and civil partners who are widowed on or after 6 April 2017. The current bereavement benefits are for surviving spouses and civil partners who are widowed before 6 April 2017.
This instrument removes references to the current bereavement benefits in secondary legislation and replaces them with references to the Bereavement Support Payment as necessary.
On 13 March 2017, the Government published the response to its consultation on several contracting-out issues, including GMP equalisation.
As proposed in the consultation, the DWP plans to introduce a new methodology for private sector pension schemes, to help them equalise benefits for the effect of GMPs.
The proposed equalisation method involves a one-off calculation and actuarial comparison of the benefits that a man and woman would have, with the greater of the two converted into an ordinary scheme benefit under the legislative facility for converting GMPs. Under the current proposals, a GMP cannot be converted into DC benefits, which will cause difficulties for DC schemes with GMP underpins.
In its response, the Government makes clear that it does not intend to require schemes to equalise GMPs using this method, nor does it consider it appropriate to provide a “safe harbour” in respect of the proposed methodology. “It is for the trustees of a scheme to decide what, if any, action is needed for their scheme to provide equal pension benefits”.
The DWP intends to consider its position on GMP equalisation in the light of any developments in the legal action taken by Lloyds Trade Union as to whether the inequality of GMPs constitutes unlawful sex discrimination
The DWP also “hopes” to be in a position to consult on any proposed changes to contracting-out legislation to enable bulk transfers without consent to take place between formerly contacted-out schemes and schemes which have never been contracted-out “by autumn 2017”.
For more details, please see our Alert.
HMRC’s latest pension schemes newsletter gives an update on the pensions measures announced at the Spring Budget 2017 and covers, among other things:
- the introduction of the new overseas transfer charge on certain transfers to a QROPS on and after 9 March 2017
- the reduction of the money purchase annual allowance (MPAA) from £10,000 to £4,000
- the Government’s proposals to amend the tax registration process for master trusts
- a reminder of the 5 April 2017 deadline for applying for individual protection 2014
- the reporting of non-taxable death benefits through “Real Time Information”, and
- the impact of the introduction of the Scottish rate of Income Tax on business processes and systems.
HMRC has today (20 March 2017) published draft guidance on the new statutory exemption for pensions advice provided to employees by employers from 6 April 2017.
Under the exemption, if an employer provides pensions advice to its employees, or pays or reimburses the costs of pensions advice incurred by the employee, the cost of the advice is exempt from Income Tax up to £500 in a tax year, provided certain conditions are met.
HMT has today (20 March 2017) published the response to its consultation on reducing the MPAA to £4,000, from its current rate of £10,000. The new rate was first proposed in the Autumn Statement 2016.
The aim of this measure is to limit the extent to which pension savings can be recycled to take advantage of tax reliefs. As part of the consultation process, the Government had sought to assess whether respondents agreed that the proposed level of MPAA would neither impact on the roll out or automatic enrolment nor disproportionately affect particular groups. As it did not receive evidence that the reduction would have any such effect, the reduction will go ahead from 6 April 2017.
The House of Commons Library has published a number of new briefing papers:
- The implications of Brexit for private pensions – this report considers the emerging discussion about the potential impact on private pensions (both occupational and personal)
- Lifetime survivors’ pensions from public service schemes – a report which looks at why some survivors of public service pension scheme members lose their survivors’ pensions if they remarry or cohabit
- Compensation for Equitable Life policyholders – examines the further debate calling for compensation for some Equitable Life policyholders.
The PLSA has published a new “Made Simple Guide” on indices and benchmarks, which is designed to provide a “straightforward introduction to a complex area of investment management”.
On 14 March 2017, added several features to its scorpion campaign to help prevent savers from falling victim to pension scams.
The new resources include:
- new videos for trustees and savers, alerting them to typical scammer tactics and the devastating consequences for scam victims
- an online scam-spotting tool for savers considering investing their pension pot
- a quick five-step guide to help savers protect themselves with practical tips and questions to consider
- a downloadable poster for providers and employers
- a checklist for trustees to help them work through the due diligence they have to do when looking at transfer requests.
Minister of State for Pensions, Richard Harrington, has announced the appointment of Ann Harris OBE as the new permanent chair of TPAS.
Ann is to oversee the continued delivery of free, professional and impartial guidance on pensions and support for people if they have a problem or complaint about their workplace or private pension, as TPAS prepares for the proposed transition to a new single financial guidance body.
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