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
- PPF Levy Ceiling and Compensation Cap Order 2017 published
- Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2017 published
- Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2017
- The Enterprise Act 2016 (Commencement No. 2) Regulations 2017 into force
- HMRC publishes Pension Schemes Newsletter 84
- HMRC publishes Issue 23 of Countdown Bulletin
- HMT publishes response on Pension Advice Allowance
- House of Commons Library Briefing Papers published
- NAO publishes report into police and firefighters’ pension schemes
- TPR issues automatic enrolment warning
The Board of the PPF charges a levy on DB occupational pension schemes (and the DB element of hybrid schemes) to fund the compensation it will pay to schemes’ members if their employer becomes insolvent and the scheme is underfunded below a certain level. The level of compensation payable to members who are below their scheme’s normal pension age is normally limited to a maximum of 90% of the compensation cap.
The Secretary of State is required to set a levy ceiling preventing the Board from raising the levy above a set maximum and uprate this annually in line with the general level of earnings in Great Britain. The Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling and Compensation Cap) Order 2017, which was laid on 30 January 2017, sets the levy ceiling at £1,007,249,095 (up from £981,724,264) for the PPF’s financial year beginning 1 April 2017.
The Order also specifies the amount of the PPF compensation cap as £38,505.61 (up from £37,420.42).
Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2017 published
Individuals with pension savings above the current LTA may be protected from tax charges under enhanced or fixed protection. Such protections can be lost if an individual is automatically enrolled into pension saving. To avoid losing their tax protection, affected individuals currently need to opt out within the statutory timeframe to prevent adverse tax consequences.
The Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2017 were laid before Parliament on 2 February 2017, and are due to come into force on 6 March 2017. These regulations amend the Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010, adding two new circumstances in which the employer duties to enrol or re-enrol eligible jobholders are turned into a discretion. Those circumstances are when an employer has reasonable grounds to believe a jobholder holds Fixed Protection 2016 (“FP16”) or Individual Protection 2016 (“IP16”), for example, because they have a copy of the individual’s HMRC certificate. The onus is on employees to keep their employer informed.
The Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2017 was laid before Parliament on 2 February 2017, with the changes coming into force on 6 April 2017.
The revised amounts for the 2017/18 tax year are set out for the upper and lower thresholds of the qualifying earnings band (for calculating contributions). These will continue to be aligned with NIC rates – £5,876 for the lower limit of the qualifying earnings band, and £45,000 for the upper limit.
The current automatic enrolment and re-enrolment earnings trigger of £10,000 remains unchanged for 2017/18.
On 1 February 2017, The Enterprise Act 2016 (Commencement No. 2) Regulations 2017 brought into force the power to make regulations to restrict exit payments from public sector employment.
The cap restricts payments to employees of prescribed public sector authorities or holders of prescribed public sector offices as a consequence of them leaving employment or office to a maximum value of £95,000, including employer pension contributions and early access to unreduced pensions.
Published on 2 February 2017, HMRC’s Pension Schemes Newsletter 84 sets out its latest updates and guidance on pension schemes.
Among other things, this newsletter covers information requirements in relation to lump sum death benefits, the closure of the QROPS online system (as recent changes to the QROPS forms mean the online system no longer captures the correct information), relief at source and a reminder that the deadline for applying for IP14 is 5 April 2017.
The Newsletter also notes that HMRC published extended drawdown pension tables in January 2017, and states that the extended tables will now apply from 1 July 2017 rather than 6 April 2017 as was previously announced, to give schemes time to update their systems.
On 6 February 2017, HMRC published issue 23 of its Countdown Bulletin, the latest in its series of updates to provide guidance and information to pension scheme administrators in relation to the abolition of DB contracting-out on 5 April 2016.
Bulletin 23 gives information about the scheme reconciliation service and process timings, a correction to information given in Bulletin 22, and a reminder about the surrender of certificates for schemes that ceased to contract-out before April 2016.
On 30 August 2016, HMT issued a consultation seeking views on the Government’s plans to allow people to use £500 tax free from their DC pension pots to pay for regulated retirement advice. This measure was recommended by the Financial Advice Market Review (“FAMR”), which suggested that high quality financial advice can have a significant impact on retirement incomes if received early. The intention to consult was then announced in the 2016 Budget.
On 3 February 2017, HMT published its response to the consultation. It confirms that the Pension Advice Allowance will be introduced as a new authorised payment from April 2017.
In changes to the original proposal, the Allowance will be able to be used a total of three times (but only once in any tax year), “allowing people to access retirement advice at different stages of their lives, for example when first choosing pension or just prior to retirement”. It will also be available at any age, and not just before 55, as first suggested, and can be combined with the tax exemption for employer arranged financial advice.
The Allowance, available only to members of DC schemes or hybrid schemes with a money purchase or cash balance element (including DB schemes with DC AVCs), can be redeemed against the cost of regulated financial advice, including “robo advice”, as well as traditional face-to-face advice.
In their response, HMT state that the FCA and TPR will also release a fact sheet in “early 2017” which will clarify trustees’ liability for advice given by a third party.
A “3 week technical consultation” on the draft regulations to implement the Allowance is expected shortly.
On 3 February 2017, the House of Commons Library published a briefing paper on the State Pension triple lock. The paper looks at the triple lock and the arguments for and against it.
An updated briefing paper looking at TPR’s powers to protect pension scheme benefits was published on 2 February 2017.
On 1 February 2017, the NAO published its findings from its investigation into the compensation paid by government to individuals who retired from the Police and Firefighters’ Pension Schemes between 2001 and 2006 without receiving their full pension entitlement.
The NAO found that the government failed to understand its obligations for the oversight of key factors that translated annual pension payments to lump sums, resulting in payments totalling £711m covering 34,000 pensioners. Due to the extent of the legal process in the case, some police and firefighters were retired for over 15 years before they received their full pension entitlement from government.
The NAO undertook its investigation after TPO upheld the case brought by Mr Milne, a retired Scottish firefighter, against GAD, in May 2015.
TPR issued a press release on 2 February 2017, warning employers that ignoring their automatic enrolment duties could lead to a County Court Judgment.
The alert came as TPR issued its latest update on its automatic enrolment enforcement activity, which showed that the number of fines had again risen: between October and December 2016 2,919 Fixed Penalty Notices were issued, bringing the total since 2012 to 9,831.
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