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

Member borne commission extension: reminder

Since 6 April 2016, service providers have been prevented from levying a charge on members to recover the cost of any commission payments to advisers, for certain advice or services, in respect of any new commission arrangements, or variations or renewals of existing commission arrangements, on or after that date. An extension of this ban relating to contracts entered into before 6 April 2016 (and which have not been varied or renewed since that date) came into force on 1 October 2017.

Service providers were given until 1 April 2018 to comply with the ban, and have until 1 May 2018 to confirm their compliance to trustees by (unless further information is required).

Trustees have an ongoing duty to inform any new service provider that their scheme provides DC benefits and is being used for automatic enrolment. They should also check that they have received the necessary confirmation of compliance ahead of the 1 May 2018 deadline.

BEIS publishes insolvency and corporate governance consultation

On 20 March 2018, BEIS published a consultation on measures designed to improve corporate governance within companies which are in or are approaching insolvency. It also seeks views on other aspects of the wider corporate governance framework and whether these are working as they should.

Responses to the consultation should be submitted by 11 June 2018.

Commenting on the consultation, Caroline Escott, Policy Lead: Investment and Defined Benefit at the PLSA said “we are glad to see the Government looking at the relationship between good corporate governance and good outcomes for pension scheme members. This is evident both in today’s consultation from the BEIS and also from the DWP’s recent defined benefit White Paper. It is imperative that the interests of scheme members remain at the forefront of a company’s considerations in the case of insolvency or restructuring.”

FCA announces changes to advice on pension transfers

On 26 March 2018, the FCA published new rules on pension transfer advice, and is seeking views on additional changes, including adviser charging structures. The new rules and areas for discussion aim to improve the quality of pension transfer advice to help consumers make informed decisions for their individual circumstances.

This follows FCA proposals in June 2017 to make changes to the rules on advice on transfers of safeguarded benefits, primarily for transfers from DB to DC schemes. The FCA has now published final rules to ensure transfer advice considers relevant factors.

The new rules include requiring transfer advice to be provided as a personal recommendation that takes account of a consumer’s individual circumstances. They also replace the current transfer value analysis with a requirement to undertake a personalised analysis of the consumer’s options and a comparison to show the value of the benefits being given up.

Following on from this work, the FCA has also published a consultation paper proposing further changes to its rules and guidance. This includes requiring advisers undertaking pension transfer advice to have the same qualifications as investment advisers. The FCA is also seeking views on whether it should intervene in relation to charging structures given the difficulty in managing the conflicts of interest that exist when providing transfer advice. The FCA’s consultation closes on 25 May 2018.

FCA publishes Data Bulletin Issue 12

The FCA has published the latest issue of its quarterly Data Bulletin, focussing on how the pensions and retirement income market is evolving

The FCA analyses market data alongside data about consumer attitudes towards and experiences of retirement saving gathered from the Financial Lives Survey, which was published in October 2017.

The Bulletin examines consumers’ perception of their pension holdings, attitudes and experience of saving for retirement, finding that “many consumers lack understanding of what they will need and what products best serve these needs”. The Bulletin also notes the continuing decline in popularity of annuities, and increased uptake in drawdown products.

FRC publishes three-year Strategy, and 2018/19 Plan and Budget

On 26 March 2018, the FRC published its 2018/21 strategy and its plan for the 2018/19 financial year, following consultation.

The FRC state that their priorities for the coming year include “a comprehensive update of the UK’s Corporate Governance and investor Stewardship Codes, a review of how audit should in future serve the public interest, a new system for audit firm monitoring and supervision, and other work to embed its mission to promote transparency and integrity in business”.

The FRC is keeping its pension and insurance levies at the same level as for 2017/18.

Changes to tax reliefs following the Scottish Government’s Budget

On 21 March 2018, HMRC issued a Notice explaining how the UK Government will ensure that tax reliefs (including pensions relief at source) continue to work as intended, when Scottish Income Tax rates and bands change from 6 April 2018.

NEST responds to rules consultation

NEST has published its response to the consultation on proposed changes to the NEST rules (issued in November 2017). The response confirms that NEST will proceed with the changes outlined in the consultation from 6 April 2018, with the exception of the proposal to apply discretion on benefits paid out following the death of a member. NEST states that it is aiming to “introduce an appropriate rule change in this area next year, following further analysis of the options”.

The new changes being introduced include allowing for contractual enrolment into NEST (which will come into effect from 25 May 2018), and giving the scheme’s trustee the ability to cease the participation of “dormant” employers who have not contributed to NEST for a specified period of time, by giving notice to the employers.

PPI publishes report on triple lock

On 21 March 2018, the PPI published a report titled “How would removal of the State Pension triple lock affect adequacy?”, exploring the potential effect of changing State Pension indexation on poverty, adequacy and State spending, and examines the future outlook for State Pension policy as a whole.

New Security of DC Assets Working Party guide issued

The Security of DC Assets Working Party has issued a guide for trustees on monitoring changes in the security of schemes’ DC assets, together with potential actions trustees may wish to take in order to maintain protection of member interests.

This is the third guide in the series, and follows the 2016 report and guide for trustees on how to consider DC asset security, and further guidance in February 2017 on how trustees might communicate their findings with scheme members.

TPR publishes blog on Master Trust authorisation

TPR has published a blog post on master trust authorisation, following the DWP’s response to consultation on the Master Trust Authorisation and Supervision Regime. In the blog, Kim Brown, Head of Master Trust Authorisation and Supervision at TPR, confirms that TPR intends to publish a draft code for consultation on 27 March 2018, and that guidance will follow during the consultation period.

The blog states that the code and guidance aim to “provide clarity on some commonly asked questions, including how to identify the people who hold key roles, like strategists, and guidance on how to produce the business plan”.

It notes that, in the coming months, all master trusts will “need to pay close attention to the code and consider applying for a readiness review, which is the opportunity for a scheme to file a draft application for certain areas, to help prepare for authorisation. We encourage master trusts to apply for a readiness review as it will be the best preparation for their authorisation application.”