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 Judicial Pensions (Additional Voluntary Contributions) Regulations 1995 (Amendment) Regulations 2017
- Government responds to Levy consultation
- Response to consultation on amending definition of financial advice published
- Government responds to consultation on evolution of NEST
- ONS publishes Annual Survey of Hours and Earnings
- PPI issues Briefing Note 92
- TPR to carry out automatic enrolment inspections
- TPR reaches settlement over BHS pensions
- WPC publishes research into SPA and life expectancy
- Sargeant and others v London Fire and Emergency Planning Authority and others
The Judicial Pensions (Additional Voluntary Contributions) Regulations 1995 (Amendment) Regulations 2017
The Judicial Pensions (Additional Voluntary Contributions) Regulations 1995 (Amendment) Regulations 2017 were laid before Parliament on 27 February 2017, and will come into force on 1 April 2017.
The regulations amend the Judicial Pensions Regulations 2015 to, among other things, take account of the creation of the Fee-Paid Judicial Pension Scheme (“FPJPS”), and ensure parity of treatment between individuals with entitlements under the existing Judicial Pensions and Retirement Act 1993 Scheme and those with entitlements under the FPJPS.
On 1 March 2017, the DWP responded to the “Occupational and Personal Pension Schemes (General Levy) (Amendment) Regulations 2017” consultation.
The consultation, launched in November 2016, considered the general levy on occupational and personal pension schemes which recovers the core funding provided by the DWP for TPAS, TPO and TPR. It sought views on the proposed rates of the levy for the financial year 2017/18 onwards.
The Government decided to proceed with its proposed approach (Option 3 in the original consultation document) without amendment. The effect of the changes will be to reduce the levy rates for schemes with 500,000 members or more in order to eliminate the surplus whilst maintaining the levy rates freeze for smaller schemes.
Regulations effecting the change have been made and laid before both Houses of Parliament, and are due to come into force on 1 April 2017.
The Financial Advice Market Review recommended that the Government consult on changing the definition of financial advice, with the aim of giving firms the confidence to give more help to their customers without fear of inadvertently crossing the boundary into regulated advice.
Having considered responses to the consultation, the Government has decided to proceed with changing the definition of financial advice for regulated firms. Regulated firms will therefore be deemed to be giving advice only where they provide a personal recommendation.
The government will leave the wider definition of advice (in the Financial Services and Markets Act 2000 (Regulated Activities) Order) as “advising on investments” in place for unregulated firms. This dual approach aims to give greater certainty to regulated firms, whilst mitigating the risk of consumers being scammed.
The Government intends to lay a statutory instrument shortly, with the new definition coming into effect on 3 January 2018. This will allow the FCA to consult on and publish new guidance. It will also align the change with the implementation of the Markets in Financial Instruments Directive II (“MiFID II”).
The FCA published an explanatory note alongside HMT’s response, which also sets out their intention to consult on and publish new guidance on the new advice requirements.
On 2 March 2017, the DWP published the Government’s response to the consultation “NEST: evolving for the future” which ran from July 2016. The document summarises the responses received, and explains the conclusions the Government reached on how it might adapt NEST’s framework.
The Government had asked in its call for evidence whether or not to allow NEST to provide additional decumulation services for its members. However, it concluded that, given the relative youth of the retirement market, and reassurances received from the industry on their intention to innovate, it did not propose that NEST should begin to offer further decumulation options at this time. The Government promises to continue to monitor the market. It notes that NEST will continue to develop its retirement proposition to members within the existing legislative framework, including offering guidance to members, offering benefits in the form of lump sums, and exploring potential links with providers of retirement products.
The Government will take forward proposals to allow employers to contractually enrol workers into NEST. It intends to bring forward legislation to allow contractual enrolment into the scheme, and to consult on the amendments later in 2017.
The response confirms that other proposed changes to extend access, including opening the scheme to individuals and transfers from other schemes without a link to automatic enrolment, will not be pursued at this time.
On 2 March 2017, the ONS published their annual survey of hours and earnings pension tables for 2016.
The survey looks at membership and contributions to workplace pension arrangements for UK employees by type, age, industry, public/private sector, occupation and size of company.
Notable findings from the data were as follows:
- workplace pension scheme membership has increased to 68% in 2016, from 64% in 2015
- in 2016, 88% of employees in the public sector had a workplace pension compared with 60% of private sector employees; however, this gap has been narrowing since the introduction of automatic enrolment
- in the private sector, 42% of employees with workplace pensions made contributions of less than 2% of pensionable earnings.
The PPI published Briefing Note 92 on 27 February 2017, entitled “How do gender differences in lifecourses affect income in retirement?” The Note follows on from PPI Briefing Note 84 (“How do female lifecourses affect retirement?”), and provides an overview of the different work and family lifecourses for men and women, aiming to understand how gender variations in the lifecourse affect income in retirement.
TPR announced on 2 March 2017 that it intends to carry out “spot checks” on employers across the UK to ensure they are complying with their workplace pensions duties.
TPR will visit employers judged to be at risk of failing to comply with their duties. As well as providing valuable insight into employer behaviour, the spot checks aim to “investigate any non-compliance, help employers get back on track or take enforcement action where necessary”. Employers will be given a short period of notice before an inspection.
Executive Director of Automatic Enrolment, Charles Counsell, said: “these spot checks make sure ongoing compliance is being maintained. It is not fair to staff if they do not get the pensions contributions they are entitled to by law. We take non-compliance seriously and will take enforcement action when we need to”.
On 28 February 2017, TPR announced that it had agreed a cash settlement worth up to £363m with Sir Philip Green, the former owner of BHS.
The arrangement, which TPR states has the support of the trustees of the two BHS pension schemes, will see Sir Philip provide funding for a new independent pension scheme to give members the option of the same starting pension as they were originally promised by BHS, and higher benefits than they would get from the PPF.
Last November, TPR issued Warning Notices to several targets outlining how it planned to instigate regulatory action as a result of its anti-avoidance investigation. Nicola Parish, Executive Director of Front Line Regulation, said: “We are confident that the agreement we have reached with Sir Philip represents a good outcome for current and future BHS pensioners, and, as such, our regulatory action will now cease. In reaching such a decision, we have to balance the outcome of any settlement against what we might achieve by pursuing anti-avoidance action, the risk of a prolonged period of legal challenge in the courts, and the delay and uncertainty that would bring to members.” Enforcement action continues in respect of Dominic Chappell and Retail Acquisitions Limited.
The PPF issued a press release on the same date, noting that the agreement “relieves the PPF’s levy payers of the cost of meeting the initially reported shortfall. [TPR] will be monitoring the new scheme and members will be protected by the PPF.
Faith Dickson of Sackers commented “While it is good to see a settlement being reached on BHS, it would be disappointing if it was seen as justification for maintaining the status quo when dealing with distressed schemes. The DWP’s green paper on “Defined benefit pension schemes: security and sustainability” is cautious about finding a way forward for pensions restructuring, but still offers an opportunity to explore better ways of putting more flexibility into the system to deliver better outcomes for members where schemes are struggling”.
On 28 February 2017, the Work and Pensions Committee published research on the “trade-off” between the State Pension triple lock and State Pension Age; this came ahead of a debate on the same day in the House of Commons on the Committee’s report on Intergenerational Fairness, which had called on Government to scrap the triple lock.
The Institute for Fiscal Studies’ research suggests that making the triple lock sustainable would mean pushing SPA to 70.5 by 2060, which is above the average life expectancy in numerous “poorer” areas of the UK.
WPC Chair Frank Field said: “With the triple lock in place the only way state pension expenditure can be made sustainable is to keep raising the state pension age. This has the effect of excluding ever more people from the state pension altogether. Such people will disproportionately be from more deprived areas and manual occupations, while those benefitting most will be the relatively prosperous.”
A claim by over 5,000 firefighters that the transitional protections put in place to minimise the impact of the public sector pension reforms has failed. The judge found that the measures did not constitute unlawful age discrimination because they were a proportionate means of achieving a legitimate aim.
An age discrimination claim was also pursued in relation to the transitional protection provided in relation to the judicial pension scheme (McCloud & others v Ministry of Justice). In that case, however, the claimants were successful and the measures were declared to be unlawful.
Please see our case report for further details.