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
- Queen’s Speech 2017
- Money laundering and PSC register regulations come into force
- FCA proposes changes to advice on pension transfers
- Law Commission publishes report on Pension Funds and Social Investment
- Pensions Institute launches DB pensions discussion paper
- PPI publishes results of Wellbeing, Health, Retirement and the Lifecourse project
- PLSA launches second longevity report
- TPR reaches final settlement in Coats anti-avoidance case
The Queen’s Speech was delivered on 21 June 2017.
Specific manifesto promises on pensions policy were absent from the Queen’s address to Parliament. It has emerged today (26 June 2017), that a move away from the “triple lock” (the promise to increase the State Pension each year by the higher of earnings, prices or 2.5%) has been shelved for now – the Government’s “Confidence and Supply Agreement” with the DUP notes that both parties have agreed that there will be no change to this measure for the duration of this Parliament.
Measures of interest that were announced include the “Financial Guidance and Claims Bill”, which seeks to combine three financial advice bodies – The Money Advice Service (“MAS”), The Pensions Advisory Service (“TPAS”) and Pension Wise – into one, with the aim of “ensuring that people across the UK are able to seek the help and advice they need to manage their finances”. The draft Bill, which received its First Reading in the Lords and was published on 22 June 2017, amongst other things:
- establishes the new statutory body, accountable to Parliament, with responsibility for coordinating the provision of debt advice, money guidance, and pension guidance
- transfers the regulation of claims management services to the FCA, and transfer complaints-handling responsibility from the Legal Ombudsman to the Financial Ombudsman Service (“FOS”).
The Speech also confirmed that the Government’s programme will include “three Finance Bills to implement budget decisions”. As such, we can expect a Summer Finance Bill 2017, which is due to include “a range of tax measures including those to tackle avoidance”.
Finally, a Data Protection Bill will aim to ensure the UK “has a data protection regime that is fit for the 21st century”. The Bill looks like it will both implement GDPR, and enshrine it in UK law. It will also “establish a new data protection regime for non-law enforcement data processing, replacing the Data Protection Act 1998” and “modernise and update the regime for data processing by law enforcement agencies”.
Changes to UK anti-money laundering measures to help prevent money laundering and terrorist financing come into force today, 26 June 2017. The changes are intended to increase the transparency of who owns and controls companies in the UK and will include changes to the people with significant control (“PSC”) regime.
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 were made and laid before Parliament on 22 June 2017. The Regulations implement aspects of the Fourth Money Laundering Directive.
HMRC’s Money Laundering Guidance has been updated to reflect the changes.
Please see our forthcoming Alert for information on the implications for pension schemes and corporate trustees.
The Information about People with Significant Control (Amendment) Regulations 2017 were laid before Parliament on 23 June 2017, and also come into force today, 26 June 2017.
Amongst other changes made, the regulations mean that companies are now obliged to record changes to information on their PSC register whenever there is a change (rather than annually, through a confirmation statement). A company must update its register within 14 days of obtaining the information, and file the information with Companies House within a further 14 days. The changes also apply to LLPs.
A company subject to an obligation to take action must comply before the end of the period of 14 days beginning with 26 June 2017. If the requirements did not apply to a company before this date (for example, in respect of Unregistered Companies and listed companies on secondary markets), the company has until 24 July 2017 to comply under transitional arrangements.
Companies House Guidance has been updated to reflect the changes to the PSC regime.
Eligible Scottish Partnerships
In addition, new laws force Eligible Scottish Partnerships, including Scottish Limited Partnerships (“SLPs”), to disclose ownership and control information. The Scottish Partnerships (Register of People with Significant Control) Regulations 2017, also coming into force today, bring SLPs into line with other UK companies, requiring them to disclose the identity of their beneficial owners. If they fail to do so, SLPs will face daily fines of up to £500.
From 24 July 2017:
- active SLPs must register PSC information with Companies House and inform Companies House of any changes within 14 days
- it will be necessary to give PSC information to Companies House when registering a new SLP.
On 21 June 2017 the FCA published new proposals on advice relating to pension transfers where consumers have safeguarded benefits, primarily for transfers from DB to DC pension schemes.
The proposals aim to reflect “the current environment and the increased demand for pension transfer advice”, since the introduction of the pension freedoms in April 2015.
The new rules outline the FCA’s expectations of advisers and pension transfer specialists to ensure that consumers receive advice which considers all relevant factors. They build on an FCA alert on advising on pension transfers published in January.
Taken together as a package, the proposals aim to ensure that advice fully takes account of an individual’s circumstances so that consumers make the right decision for them.
Christopher Woolard, Executive Director of Strategy and Competition at the FCA said: “Defined Benefit pensions, and other safeguarded benefits such as guarantees, are valuable so most consumers will be best advised to keep them. However, we recognise that the environment has changed significantly, so we want to ensure that financial advice considers the customer’s circumstances in full and recognises the various options now available to them. Our new approach should better equip advisers to give the right advice so that consumers make well informed decisions.”
The proposals include:
- replacing the current transfer value analysis requirement with a comparison showing the value of the benefits being given up
- introducing a rule to require all advice in this area to be provided as a personal recommendation, which fully reflects the client’s circumstances and provides a recommended course of action
- updating guidance on assessing suitability when giving a personal recommendation to convert or transfer safeguarded benefits, so that advisers focus on whether a transaction is right for a particular individual
- introducing guidance on the role of a pension transfer specialist
The consultation is open until 21 September 2017. The FCA intends to publish its new rules in a Policy Statement in early 2018.
According to the report, there are no legal or regulatory barriers to pension schemes making social investments. However, it finds that, “unlike in other countries”, UK DC schemes are not investing in social investments like infrastructure.
Law Commissioner Stephen Lewis said: “it is possible to do well and do good at the same time and we’ve seen billions invested in infrastructure in places like Australia delivering for savers and society. In the UK there seem to be some misconceptions as to whether this is allowed for these pension schemes. We’re clear, legally, there’s nothing to stop them doing the same.”
The report goes on to identify steps which could be taken by government and regulators to help lift what it sees as structural and behavioural barriers within the pensions industry. The Law Commission feels that such barriers might explain the low levels of social investment.
On 21 June 2017, the Pensions Institute, with Cass Business School, published a discussion paper calling on the Government to “shift UK pensions policy towards delivering fair pensions for the greatest number of people who are members of private-sector defined benefit (DB) pension schemes”. The paper is a response to the DWP’s green paper on security and sustainability in DB pension schemes.
The discussion paper makes a number of findings and recommendations for improving the security and sustainability of UK DB pension schemes. In particular, the Institute recommends a policy of “second best” outcomes, which would allow schemes with weak sponsors at a risk of insolvency to negotiate settlements for their members between full benefits and the level of compensation provided through the PPF.
Professor David Blake, Director of the Pensions Institute, said: “The difference between the potential value of negotiated benefits and PPF benefits represents a significant loss to members, sponsor organisations, PPF levy payers and society as a whole. Instead seeking ‘the greatest good for the greatest number’ would prevent the destruction of billions of pounds in economic value. It would also produce a more equitable distribution of benefits for younger members who stand to lose much more on insolvency because of the way PPF benefits are calculated.”
The Pensions Policy Institute has published the results of its Wellbeing, Health, Retirement and the Lifecourse project, which investigated lifecourse influences on later life work and the implications for wellbeing, health and financial outcomes of working up to and beyond State Pension Age in the UK.
The report examined Government policies to encourage longer working lives, including increases to SPA, removal of default retirement ages, and the Government’s “Fuller Working Lives” and “Age Positive” initiatives. The report found that policies aimed at extending working lives beyond SPA that fail to recognise individual differences in labour market histories, health and socio-demographic characteristics, and the way that these can influence the outcomes of such policies, may exacerbate existing inequalities. It also finds that policies that seek to redress inequalities throughout the lifecourse may be more effective in encouraging and enabling more individuals to work beyond SPA than policies focusing on the retirement transition.
In 2014, the PLSA in conjunction with Club Vita looked at the difference in future life expectancy between the national population and members of DB pension schemes. It found that there were significant differences in the pace of life expectancy increases among different affluence/lifestyle groups.
The new report – “Does one size fit all?” – divides scheme members into the same socio-economic groups as before. It finds that pensioners in its “Comfortable” bracket have seen life expectancy increase at a much faster rate than those in their lower income (“Hard-Pressed” and “Making-Do”) categories.
The report also includes some updated scenarios for the future, and aims to “help enable better decision-making and management by pension scheme trustees and sponsors”.
Steven Baxter, Head of Research at Club Vita commented that “having an insight into the socio-economic dynamics of longevity trends has never been more important. Our evidence that affluent men are living longer and pulling away is hugely important. It will have a massive impact on the projections and assumptions used by pension schemes, as a large proportion of the liabilities are in this socio economic group.”
On 26 June 2017, TPR announced that it had agreed a settlement for a third DB scheme as part of its anti-avoidance investigation into thread manufacturer Coats Group Plc (“Coats”).
In December 2016, TPR confirmed that its action had resulted in payment of £255 million from Coats, helping to safeguard the benefits of approximately 27,000 pension scheme members in the Coats Pension Plan and the Brunel Holdings Pension Scheme.
Today’s report highlights a settlement for the third and final scheme in the investigation, the Staveley Industries Retirement Benefits Scheme (“SIRBS”), with 3,700 members and an estimated ongoing deficit of £85 million. The agreement includes an upfront payment of £74 million into the scheme, a change in the statutory employer to Coats Limited and a full (buy-out) guarantee from Coats covering the liabilities of SIRBS. In light of this agreement TPR has agreed to cease regulatory action.
Executive Director of Frontline Regulation Nicola Parish said: “Today’s report shows that even though our concerns about the funding of the schemes were enough to launch anti-avoidance action and issue Warning Notices, we maintained a strong working relationship with Coats and the trustee, allowing us to be flexible and achieve a fair resolution. We will not hesitate to use our Financial Support Direction powers where we see member benefits put at risk, even where the sponsoring employer is solvent.”