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
- DWP to take over responsibility for the Pensions Dashboard
- DWP publishes findings on customer experience of Pension Wise
- FCA publishes results from Financial Lives Survey
- HMRC updates its guidance on paying pensions tax charges
- House of Commons Library publishes briefing papers on DB scheme funding and pensions tax reform
- ONS statistical bulletin: Pensioners set to benefit as inflation reaches 3%
- PLSA launches three new “Made Simple” guides
- PPF launches consultation on contingent assets in the PPF levy
Speaking at the PLSA conference on 19 October 2017, Parliamentary Under-Secretary of State at the DWP, Guy Opperman, announced that the DWP will take forward the Pensions Dashboard project on behalf of the Government, taking over responsibility from HM Treasury.
Graham Vidler, Director of External Affairs at the PLSA commented: “Today’s announcement that DWP will take forward the Pensions Dashboard project has the potential to reconnect millions of people with their hard-earned pension savings.
“The Minister’s support of the Pensions Dashboard is great news for savers – who will be placed at the heart of the project. The dashboard could have a revolutionary effect on the way people engage with pensions, but it needs regulation and strong governance underpinning it. This is a job for government and we are pleased DWP has been tasked with leading the project.
“We look forward to working closely with the DWP and other stakeholders on this exciting initiative – bringing pensions into the digital age.”
Today, 23 October 2017, the DWP has published a report on its analysis of quantitative research undertaken with Pension Wise customers, as well as those who were eligible for the service but did not use it. The research (carried out by Ipsos MORI, on behalf of Pension Wise) measures the success of the service in terms of customer experiences and the outcomes achieved, relative to non-users.
The report notes that overall customer satisfaction with the service was consistently high across several measures:
- 94% of customers who completed appointments were satisfied, while 79% were very satisfied
- 90% felt that they were helped to make an informed choice about their next steps
- over 90% were satisfied with various aspects of their appointment, including convenience, waiting times, length, knowledge of the Pension Wise guider, clarity of discussions, and the fact that discussions took on board personal circumstances.
The research also found that Pension Wise has been shown to provide high levels of customer satisfaction, and that having an appointment with the service was strongly linked to improvements in knowledge and understanding of pensions options, as well as making progress towards deciding on their access options.
The FCA published the results of its Financial Lives Survey 2017 on 18 October 2017.
According to the FCA’s report:
- 66% of all UK adults have one or more private pensions
- 31% have no private pension provision
- 3% do not know if they have private pension provision or not.
The FCA notes that auto-enrolment “appears to be encouraging saving for […] retirement”. However, while consumers are “learning through age and experience”, this is “not to the point where the majority are well equipped to make important financial decisions, such as how best for their own circumstances to access a defined contribution (DC) pension. A full quarter of those who accessed a DC pension in the last two years are not able to say how they did so, i.e. whether they purchased an annuity or accessed their pension pot in another way.”
Low levels of engagement with planning for retirement are a risk factor for financial security in later life, with 35% of DC pension holders in the 45-54 age bracket not knowing how much they / their employer contribute to their pension. Similarly, around a quarter of those aged 55-64 with a DC pension do not know how much they have in their DC pension pot.
On 19 October 2017, HMRC updated its guidance for pension scheme administrators on how to pay tax. The latest update reflects the fact that, from 15 December 2017, it will no longer be possible to pay any tax charges due at the Post Office.
The House of Commons Library has published two new briefing papers:
- Defined benefit scheme funding (published 17 October 2017), covers the main measures of pension scheme funding, including TPR’s approach to regulating scheme funding and current proposals for reform. Charlotte Clark, Director for Private Pensions at the DWP, speaking at the PLSA conference last week, announced that the Government’s white paper on DB pensions is due by the end of February 2018
- Reforming pension tax relief (19 October 2017), which looks at the current (and historical) debate on the reform of pension tax relief. For example, one of the options considered in the briefing paper is for tax relief on contributions to be provided at a single, standard rate, rather than an individual’s marginal rate.
The ONS published its latest statistical bulletin on UK consumer price inflation on 17 October 2017. This confirms that the CPI 12-month rate for September 2017 was 3%.
Pensioners are set to benefit from this rise, which is the highest inflation figure since 2012. Under the “triple lock” guarantee, state pension payments must increase by the higher of prices, earnings or 2.5%. A 3% increase will also be applied in occupational pension schemes which apply the Limited Price Indexation rules to pensions in payment, for pensions accrued between 6 April 1997 and 5 April 2005, and 2.5% for the pension that accrued after 5 April 2005. A 3% increase will also apply to GMPs that accrued after 5 April 1988.
The PLSA launched three new “Made Simple” guides at its annual conference on 18 October 2017:
- Fiduciary management made simple aims to help pension scheme trustees understand how fiduciary management can help them overcome the typical difficulties faced by DB pension schemes in managing investment portfolios. It looks at ways in which fiduciary management can help pension schemes achieve their funding goals, while highlighting certain aspects of the subject which trustees should consider carefully before they adopt such an approach. These include how trustees navigate the fiduciary management market, including a case study that illustrates the steps trustees might take when appointing a fiduciary manager
- Good quality data for the private sector includes a simple step-by-step process which is designed to help trustees and others put in place a well thought out and prioritised plan of assessment and action for managing pension scheme data. The guide also shows how, through asking some basic questions and following some simple steps, it is possible to actively monitor and manage the ongoing quality of scheme data
- Integrated risk management made simple gives an overview of the IRM process, including how trustees, sponsors and advisers can work together to address the interrelationships between three fundamental risk areas: covenant, investment and funding. The guide notes that IRM is not a discrete piece of work, but a risk-centric approach to decision-making.
The consultation focuses on two main issues:
- the type of obligations that should be covered in contingent asset agreements, and
- the operation of the liability caps in the agreements, in particular, the fixed cap.
As the PPF explained in its combined Third Triennium Policy Statement and 2018/19 consultation document, it will not require existing contingent asset agreements to be re-executed by 31 March 2018 in order to continue to receive levy credit. However, the PPF does expect to include such a requirement in the Levy Rules for levy year 2019/20.
This consultation closes at 5pm on 21 November (the PPF’s consultation on its 2018/19 Levy Rules closes on 1 November 2017). The PPF has said that it is aiming to provide revised contingent asset forms in January 2018.