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
- Consultation on PPF regulations to take account of bridging pensions
- ECWG publishes guidance for DB schemes
- HMRC publishes Countdown Bulletin issue 27
- HMRC pension schemes newsletter 90 published
- TPR issues warning on anti-scam websites
On 31 August 2017, the DWP published a consultation on the draft Pension Protection Fund (Compensation) (Amendment) Regulations 2017.
Bridging pensions allow individuals who retire before reaching SPA to be paid a higher rate of pension initially, which then reduces when the individual begins to receive their State Pension or reaches an age specified in their scheme rules.
The consultation is aimed at resolving an “anomaly” whereby pensioner members in receipt of a bridging pension at the higher rate when their scheme enters the PPF, receive PPF compensation based on this higher rate for life. Had the pension scheme not entered the PPF, the member’s scheme pension payments would have later reduced. For some members, this means that they may be financially better off in the PPF than they would have been in the normal course under their scheme rules. The paper notes that such members therefore “take a disproportionate amount of scheme assets when their scheme enters a PPF assessment compared with other members of the scheme who are not in receipt of a bridging pension”. The Financial Assistance Scheme (FAS) already takes account of bridging pensions.
The draft Regulations would allow the PPF to take account of bridging pensions by smoothing the amount of PPF compensation over an individual’s lifetime; this is the Government’s preferred approach.
The consultation also puts forward an alternative option, whereby the PPF would mirror a scheme’s rules, paying a member compensation based on the higher rate until the date specified in the rules of the original scheme, then recalculating the compensation to reduce it to the lower rate. However, the consultation notes the “additional complexity inherent” in this option.
Finally, the Government is interested in whether changes are required in respect of GMPs, and if PPF compensation should reflect increases in a member’s scheme pension which would have taken place at GMP age, to ensure that the GMP requirements are met.
The consultation closes on 1 October 2017.
On 1 September 2017, the Employer Covenant Working Group (ECWG) published “Transactions in a distressed environment: Guidance for practitioners”.
The guidance has been developed by the ECWG with the aim of assisting practitioners in evaluating the impact of a range of distressed scenarios on the covenant of sponsoring employers, the risks to the security of member benefits and the related advice that they may give to their clients. It aims to bring out key issues which may be relevant in different distressed scenarios and potential solutions, based on practitioner experience.
The guidance is stated not to be exhaustive or prescriptive, as it notes that the impact of any distressed scenario on covenant will be specific to its own circumstances, and any response “must take account of the full range of issues ‘in the round’”.
The ECWG states that “as regulatory and market practice evolves, practitioners are encouraged to develop leading practice further”.
On 30 August 2017, HMRC published issue 27 of its “Countdown Bulletin”, which provides important information about the ending of contracting-out.
This latest edition of the bulletin includes advice from the DWP to HMRC on the aggregation of employment periods and refund of CEPs requests, and information on further minor administrative issues.
The Bulletin also reminds people that there are only 13 months left to submit final Scheme Reconciliation Service queries to HMRC, who will only accept queries up to October 2018.
Pension schemes newsletter 90 was published by HMRC on 31 August 2017. Among other things, it includes:
- information on the annual allowance calculator, pension savings statements and annual allowance charges for the tax year 2016 to 2017
- information on relief at source for Scottish Income Tax
- a reminder of the procedures for reporting transfers to QROPS
- details of the move to the new service for pension scheme registration and scheme administration, which, in an update to the information given in Newsletter 89, will apply to existing scheme administrator data by April 2018 (rather than 2019).
On 4 September 2017, TPR issued a press release warning that rogue pension websites are carrying anti-scam messages to try to trick consumers into believing that they are legitimate businesses.
A number of suspected scam websites have been referred to TPR over the suspicion that they are being dressed up as legitimate investment vehicles – including carrying the “Project Bloom” campaign (the multi-agency campaign aimed at preventing pension scams) anti-scam material without TPR’s consent.
Some websites imply they are regulated by carrying warning messages designed to prevent people falling victim to scams, such as making reference to the tax implications of accessing pensions before the age of 55 and the danger of cold callers.
TPR states that, where it finds such websites, it will demand they immediately cease using material that TPR owns and will investigate with other agencies whether further action, such as legal proceedings, should be launched.