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

Finance (No 2) Act 2015 published

The Finance (No. 2) Bill 2015 (“the Bill”) received Royal Assent on 18 November 2015 and is now known as the Finance (No.  2) Act 2015 (“the Act”).  The Act, which introduces a number of provisions that were announced by the Chancellor in his Summer Budget, contains key provisions relating to pensions.

Key points are as follows:

  • there have been no material changes since the draft Bill was first published, but some errors and inconsistencies have been tidied up
  • tax on lump sums paid in respect of individuals who die aged 75 and over will be payable at the recipient’s marginal rate from the tax year 2016/17
  • the Act introduces restrictions on pensions tax relief for higher earners, using a tapering mechanism.

For full details, please see our Alert.

DWP publishes new consultation

On 23 November 2015, the DWP published its latest consultation in relation to pensions. The consultation seeks views on proposed minor and technical regulatory changes to four areas of legislation, with the aim of ensuring that the new pension flexibilities operate as intended.  These are:

  • pension sharing on divorce, including a requirement that, where an attachment (or “earmarking”) order exists, schemes will have to write to the former spouse at the point the member applies to take their flexible benefits, informing them that the member has chosen to take their benefits, in which form and from when
  • technical changes needed to allow the pension flexibilities to operate in specific situations (for example, where a scheme is winding up)
  • the PPF, including amendments to the regulations around schemes whose sponsoring employer cannot have an insolvency event
  • disclosure of information, to place an obligation on trustees of occupational schemes to give generic risk warnings to scheme members who wish to take their benefits flexibly.

The consultation also seeks views on how the Government should simplify the valuation process for the purposes of the new advice requirement for pensions with a guaranteed annuity rate.

DWP publishes Automatic Enrolment Evaluation Report 2015

On 18 November 2015, the DWP published its third annual Automatic Enrolment Evaluation Report and research summary. The report brings together the latest evidence to show what has happened since automatic enrolment began in 2012 and updates the indicators the DWP use to monitor progress throughout the implementation of automatic enrolment.

Some key findings of the report were as follows:

  • at the end of September 2015, more than 5.47 million eligible jobholders had been automatically enrolled by over 60,000 employers since the start of automatic enrolment. All large and medium sized employers have now passed their “staging date” – the date when the automatic enrolment duties first apply to them
  • up to the end of August 2015, 10% of automatically enrolled jobholders had opted out
  • the annual total amount saved in workplace pensions was £80.3 billion in 2014, an increase of £2.7 billion from 2013; there was a fall of £0.5 billion in public sector saving
  • the amount saved per eligible jobholder in the private sector declined between 2012 and 2014; the DWP suggest that this is likely to be due to the majority of the increased number of savers making contributions at the minimum level, and some “levelling down” by employers
  • 86% of employers enrolled eligible jobholders into DC schemes, and of these, 50% chose to use a multi-employer master trust.

EIOPA Chairman calls for EU-wide framework for occupational DC schemes

At EIOPA’s annual conference on 18 November 2015, the EIOPA Chairman, Gabriel Bernardino, discussed the development of “a simple, standardized and fully transparent pan-European Personal Pension Product” (see below) – and called for a “simple and transparent EU framework” governing occupational DC pension funds. Mr Bernardino said: “At an EU level, while recognising the high sensitivity around pensions discussions, a further important step would be to design a simple and transparent EU framework for defined contribution occupational schemes.  This framework should be capable to take full advantage of the potential of the EU internal market by providing a cross-border platform that would reduce costs, support long-term funding of the EU economy and ultimately deliver better pension outcomes.”

EIOPA launches online industry survey on a pan-European personal pension product

Ahead of EIOPA’s annual conference on 16 November 2015, EIOPA launched a survey on the attractiveness of a standardised pan-European personalised pension product (PEPP).

EIOPA originally published a consultation paper on 7 July 2015 (see our 7 Days of 13 July) relating to the creation of a PEPP, with the consultation period ending on 5 October 2015. EIOPA is now seeking input in particular from the insurance and pensions sectors, together with the asset management industry, on the attractiveness of the PEPP. Questions include cross-border issues, and whether there is any “added value” for providers in offering a PEPP.

There is limited time for responding to the survey – the deadline for responses is 30 November 2015.

FCA launches asset management market study

On 18 November 2015, the FCA formally launched, and published the terms of reference for, their asset management market study. The aim of the study is to understand whether competition is working effectively to enable investors to get value for money when purchasing asset management services.

The FCA wishes to assess:

  • how asset managers compete to deliver value
  • whether asset managers are motivated and able to control costs along the value chain
  • what effect investment consultants have on competition for institutional asset management.

In addition, the FCA will look at whether there are any barriers to innovation and/or technological advances in asset management.

Although the FCA is not formally consulting on the terms of reference, it welcomes any comments on the issues raised, or other related comments, by 18 December 2015. It aims to publish interim findings in summer 2016 and a final report by early 2017.

House of Commons Library briefing papers published

The House of Commons Library has published a number of updated briefing papers:

HMRC issues latest “Countdown bulletin” on the abolition of DB contracting-out

On 17 November 2015, HMRC issued its latest contracting-out countdown bulletin. Issue 11 provides further guidance for pension scheme administrators ahead of the end of contracting-out on 5 April 2016.  Amongst other things, this bulletin provides information on:

  • Pensions Forums to be held in December 2015
  • a call for volunteers to test its GMP Service
  • a reminder on the timings for reconciling active membership records, and information about a related survey
  • the new customer relations team email address.

PPF publishes guidance on legal actions contemplated by insolvency practitioners

The PPF generally assumes all creditor rights of pension scheme trustees in relation to an insolvent employer, from the start of a PPF assessment period. It will exercise those rights to the exclusion of the trustees.

On 11 November 2015, the PPF published a guidance note explaining the approach adopted by the Board of the PPF when asked by insolvency office holders to consider the merits of, or approve the instigation of, legal action.  It also sets out how the PPF will view a defence to legal action.