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

EU referendum result

On 23 June 2016, the EU referendum took place and the people of the UK voted to leave the European Union by 52% to 48%. The UK will have two years from the date on which it formally notifies the EU Council of the decision to leave, to negotiate the terms of its withdrawal.

Following the declaration of the result, the UK’s EU Commissioner, Jonathan Hill, issued a statement announcing that he would be standing down from the Commission. Lord Hill has served as Commissioner for Financial Stability, Financial Services and Capital Markets Union since September 2014, during which time he has been responsible for relations with the European regulator of workplace pensions – the European Insurance and Occupational Pensions Authority.

Amongst other bodies, the PLSA responded to the referendum result by issuing a press release on 24 June 2016, in which it recognised that the connotations of the decision will take considerable time to resolve and fully understand.

European Commission has “no plans” to harmonise solvency rules for occupational pensions

Negotiations on the second Pensions Directive (“IORP II”) are drawing to a conclusion, with the final text anticipated imminently.

Speaking at the Pensions Europe conference on the day of the referendum, Lord Hill explained that, while the Directive has been designed to “modernise the framework for the regulation of occupational pensions across the EU”, there are “no plans to harmonise solvency rules for occupational pensions and there are no plans to introduce a standardised risk assessment process.”

Lord Hill also noted that a consultation on the cross-border provision of personal pension products was due to be launched before the summer break.

EIOPA publishes Financial Stability Report

EIOPA published its biannual report covering financial stability in the occupational pension fund sectors of the EEA on 21 June 2016. The report covers developments in financial markets, the macroeconomic environment, and the insurance, reinsurance and pension sectors as of the end of April 2016. EIOPA “observes an ongoing extremely challenging macro-economic and financial environment”, in particular commenting on the challenges posed to pension schemes by continuing low interest rates.

FAMR: Financial Advice Working Group established

On 20 June 2016, the FCA announced the establishment of a Financial Advice Working Group, as recommended in the final report on the Financial Advice Market Review (“FAMR”) in March 2016.

The FCA also published the terms of reference of the Working Group, which will be responsible for taking forward the three recommendations assigned to it by the FAMR, namely that it should:

  • work with employer groups to develop a guide to the top ten ways to support employees’ financial health and devise a strategy for rolling this out. It should align the timing of this with the factsheet for employers and trustees that is due to be published jointly by the FCA and TPR in early 2017
  • publish a shortlist of potential new terms to describe “guidance” and “advice” by Q3/Q4 2016
  • lead a task force formed of interested stakeholders to design a set of “rules…and nudges” with the aim of increasing consumer engagement.

The Working Group will not be responsible for taking forward the implementation of the FAMR, for which the FCA and HMT will be responsible, but will act as a source of ongoing expertise during implementation of the recommendations.

NEST responds to rule change consultation

On 24 June 2016, NEST published a response to the consultation on proposed changes to its scheme rules issued in January 2016.  The changes were proposed with the aim of bringing aspects of the scheme into line with recent pensions legislation, and take account of the lifting of the restrictions on NEST from April 2017 (removing the limits on transfers into and out of the scheme and the level of contributions that can be paid into it).  The changes will also give the trustee of NEST powers to pay out additional types of benefit to NEST members, in line with the “freedom and choice” options.

The response confirms NEST’s intention to implement all but one of the changes it consulted on; it does not currently intend to implement a change allowing members’ pots to remain open once they have taken all their money out of NEST. It states that NEST will however revisit this point in the future.

TPR publishes prosecution policy documentation

TPR published a draft prosecution policy for consultation in January 2016, which is of potential relevance for anyone who could be subject to criminal proceedings by TPR. TPR has now published the consultation response, summarising the views submitted, providing its own response on the issue and describing the changes made to the policy document in the light of responses. TPR published the updated version of the prosecution policy at the same time.

To prevent duplication, TPR’s Automatic Enrolment Compliance and Enforcement Policy has also been updated by removing its section on prosecution. This policy now cross-refers to the main prosecution policy.

TPR states that it aims to consult in due course on a draft policy explaining its approach in cases where it would be open to it to bring criminal proceedings and use civil regulatory powers.

New state pension: Government’s response to Select Committee published

On 22 June 2016, the Work and Pensions Committee published the Government’s response to its report into the way in which the new state pension was communicated to the general public in the run-up to its introduction in April 2016.

Following the Committee’s recommendation, the Government has agreed to write directly to those people who do not meet the Minimum Qualifying Period for the new state pension (10 qualifying years of NI contributions), who stand to receive less from the new state pension than they would have expected to get under the old system.

The Government has also committed to promote and enhance the “Check your State Pension” service, which gives an individual’s forecast state pension.

Ms Bennett v Department of Health and the NHS Business Services Authority (25 April 2016)

The PO held that an NHS employer breached an implied duty by failing to inform an employee of a 12-month time limit for transferring in benefits on a more favourable basis known as the “Public Sector Transfer Club basis”.

Please see our case report for further details.

Mr N v Philips Electronics UK Limited and Philips Pension Trustees Limited (25 May 2016)

In this case, the PO did not uphold a complaint that a principal employer and trustee had denied a member the option of taking up a pension increase exchange.

Please see our case report for further details.