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

The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016

Following the publication of DCLG’s guidance on the subject, the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 were laid before parliament on 23 September 2016, and will come into force on 1 November 2016.

The regulations make provision in relation to the management and investment of pension funds held by administering authorities required to maintain such funds by the Local Government Pension Scheme Regulations 2013.

MoJ consults on Fee-Paid Judicial Pension Scheme draft regulations

The Ministry of Justice has published a consultation on the draft Judicial Pensions (Fee-Paid Judges) Regulations 2017, which establish the Fee Paid Judicial Pension Scheme to comply with court and tribunal rulings in the case of OBrien and related litigation. The consultation also seeks views on proposed changes to the Judicial Pensions Scheme Regulations 2015.

The purpose of the regulations is to provide eligible fee paid judicial office holders with pension benefits, both retrospective and going forward, which are comparable to those available for salaried judges (as far as possible).

The consultation ends on 20 October 2016, and the aim is for the Scheme to come into force by 1 April 2017.

HMT launches consultation on amending the definition of financial advice

On 20 September 2016, HMT published a consultation seeking views from the public on proposals to amend the definition of regulated financial advice. This follows the announcement in the 2016 Budget that it would look to do so, and the findings of FAMR published in March 2016.

The consultation states that the aim is to give firms the confidence to develop better and more tailored guidance services to help customers make informed financial decisions: “Some consumers have relatively straightforward financial needs or small amounts to invest. For such consumers, the cost of full regulated advice may outweigh the benefits, or it may be uneconomic for firms to provide them with regulated advice. Currently, firms are reluctant to offer guidance services to these consumers, increasing the risk of them making poor investment decisions on their own. A key reason for this reluctance is uncertainty around what constitutes regulated advice and what does not.”

One recommendation FAMR made was therefore to amend the definition of “regulated advice” in Article 53 of the existing Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, to bring it in line with the EU definition set out in the Markets in Financial Instruments Directive (MiFID). This would mean that only advice which makes a personal recommendation would be regulated.

The consultation sets out the background on this issue and seeks views on the potential costs and benefits of the change and any possible risks. The consultation closes on 15 November 2016.

Public sector exit payments: response published

On 26 September 2016, HMT confirmed that reforms to public sector exit payments would go ahead, and published its response to its earlier consultation.

The exit payment framework includes proposals to taper the amount of lump sum compensation an individual is entitled to receive as they get closer to their normal pension retirement age.

The Government will also consider taking action to limit or end employer-funded early access to pension as an exit term, looking at proposals appropriate to each workforce, including:

  • capping the amount of employer funded pension ‘top ups’ to no more than the amount of the redundancy lump sum to which that individual would otherwise be entitled
  • removing the ability of employers to make such top ups, or offer greater flexibility to employers to determine the specific circumstances in which they would be available
  • increasing the minimum age at which an employee is able to receive an employer funded pension top up.

The response document confirms that the Government intends to ensure any reforms do not breach the provisions of the Public Service Pensions Act 2013: “Employees would remain entitled to pensions they have accrued during their employment and there would be no change to the age at which ‘normal’ retirement is available under existing scheme terms”.

HMT explains that detailed proposals will follow in due course.

Appointment to Pensions Dashboard steering group announced

PASA announced on 19 September 2016 that Margaret Snowdon, its Chairman, had been appointed to HMT’s Steering Group for the Pensions Dashboard prototype project.

Ms Snowdon commented: “At PASA we are very supportive of the dashboard concept and we are dedicated to devoting our time and energy to helping both administrators and schemes plan for their important role in a future dashboard or dashboards.”

Briefing paper on secondary annuities market published

On 21 September 2016, the House of Commons Library published a briefing paper which examines the plans to allow annuity holders to sell their annuity income stream to a third party from April 2017.

ICAEW to update Master Trusts Assurance reporting guidance

The ICAEW is consulting on a revision of its Technical Release on Assurance reporting on Master Trusts.

The update to the original May 2014 paper, produced jointly with TPR, takes into account recent changes to DC guidance and legislation, and removes references to TPR’s earlier DC ‘quality features’. It also takes into account experiences from applying the current framework.

The consultation closes on 10 October 2016.

ICSA publishes guidance on minute taking

On 19 September 2016, ICSA: The Governance Institute published guidance on the practice of minuting meetings, together with a feedback statement on the consultation conducted between May – July 2016.

The guidance states that there is no “right way” to draft minutes, noting that “it is up to each individual organisation to decide how best its meetings should be recorded”. Therefore the guidance aims to avoid “undue prescription”, and instead focusses on being principles-based. As well as covering the legal and regulatory framework, and drafting principles, the guidance also considers issues of access to minutes, retention of notes, and recording meetings.

Although not specifically aimed at pension scheme trustees, the guidance will be relevant to trustee boards which are established as companies under one of the Companies Acts.

ONS publishes Occupational Pension Schemes Survey 2015

On 22 September 2016, the ONS published its UK Occupational Pension Schemes Survey for 2015. This survey considers the nature of occupational pension provision in the UK by providing summary data on membership of schemes and contributions paid.

The survey found that in 2015:

  • total membership of occupational pension schemes in the UK was 33.5 million, the highest level ever recorded by the survey, representing an increase of 10% compared with 2014
  • active membership of occupational pension schemes was 11.1 million, split between the private (5.5 millions) and public (5.6 million) sectors
  • in private sector DC schemes, the average total (member plus employer) contribution rate was 4.0%, broadly comparable with 2014.

PPF announces levy estimate for 2017/18

On 22 September 2016, the PPF published its consultation on changes to the Pension Protection Levy for 2017/18. The document:

  • states that the levy estimate for 2017/18 remains at £615 million
  • sets out a proposed mechanism for stakeholders to notify Experian, the PPF’s insolvency risk services partner, where the move to new UK accounting standard FRS 102 would otherwise cause an artificial movement in their rating
  • reiterates the PPF’s position on schemes that have no substantive sponsoring employer, including the need for a new approach for calculating risk-based levies where such schemes do exist.

The levy consultation closes on 31 October 2016, with the PPF aiming to finalise the rules and publish the levy determination in December. It will also consult on the new levy triennium around the end of the year.

PPI publishes report on at-retirement financial advice

On 20 September 2016, the PPI published a report, sponsored by LV=, on at-retirement financial advice in the workplace.

The report draws on new qualitative research exploring employers’ reactions to two new initiatives that HMT is currently considering:

  • increasing the tax exemption around employer-arranged pensions advice from £150 to £500
  • introducing a Pensions Advice Allowance, allowing DC savers to withdraw up to £500 from their DC pension funds without incurring a tax penalty, provided that this amount is used to purchase pre-retirement advice.

The research provides an overview of some of the options with the aim of stimulating discussion around these.

Mr N vs Dundee City Council and the Scottish Public Pensions Agency (PO-9507)

In this case, the PO found that the respondents were not under a duty to ensure that a member had understood that opting out of pensionable service would mean that, on her subsequent death, her survivors would not be entitled to a lump sum death benefit.

To determine whether there had been a duty to inform the member of the implications of opting-out, the PO had to consider the implications of the House of Lords judgment in Scally v Southern Health Board. The PO also distinguished the recent determination in the case of Bennett.

For full details please see our case report.