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

Abolition of contracting-out: consultation response published and legislation laid before Parliament

On 1 March 2016, the DWP published their response to the consultation on The Pensions Act 2014 (Abolition of Contracting-out for Salary Related Pension Schemes) (Consequential Amendments and Savings) Order 2016.

The consultation had asked for views on proposed legislative changes to other secondary legislation to take account of the abolition of contracting out, and which followed on from the regulations published in September 2015 (The Occupational Pension Schemes (Schemes that were Contracted-out) (No.2) Regulations 2015) and the draft State Pension and Occupational Pension Schemes (Miscellaneous Amendments) Regulations 2016 that are due to come into force in April 2016.

There was broad agreement by most respondents that the provisions in the Order were necessary, and would ensure schemes are able, post abolition, to carry out their administrative functions. Some provisions come into effect on 6 April 2016 and others at later dates.

The DWP notes that a number of issues raised during the consultation could not be addressed by changes to the Order, including anti-franking and some further transfer issues. The response explains how these remaining issues will be dealt with.

The State Pension (Amendment) (No 2) Regulations 2016 were laid before Parliament on 1 March 2016. These Regulations amend the State Pension Regulations 2015, inserting provisions relating to the crediting of NI contributions for the purposes of entitlement to the new state pension.

On 2 March 2016, the Pensions Act 2014 (Contributions Equivalent Premium) (Consequential Provision) and (Savings) (Amendment) Order 2016 (S.I. 2016/252) was also laid before Parliament.

A contributions equivalent premium (“CEP”) may currently be paid where an individual has served less than two years in a salary-related contracted out scheme and then leaves the scheme (leaving contracted out employment). In such circumstances, the scheme may (and, where there are no accrued rights in the scheme, must) pay an amount to the National Insurance Fund so that the member is reinstated in the State Pension.

This Order makes provision for the payment of CEP following the ending of contracting-out from 6 April 2016.  It is intended to prevent a CEP payment being made when contracting-out ends and the member remains in the scheme.

The Occupational and Personal Pension Schemes (Modification of Schemes – Miscellaneous Amendments) Regulations 2016

On 1 March 2016, the Occupational and Personal Pension Schemes (Modification of Schemes – Miscellaneous Amendments) Regulations 2016 (“the Regulations”) were published.

Due to consequential changes to legislation in relation to the abolition of DB contracting-out with effect from 6 April 2016, open contracted-out schemes which operate fixed rate revaluation of GMPs are likely to need a rule amendment. These Regulations provide trustees with a statutory modification power to assist with the change and will come into force on 6 April 2016.

For full details, please see our Alert.

The Social Security Revaluation of Earnings Factors Order 2016

The Social Security Revaluation of Earnings Factors Order 2016 was laid before Parliament on 29 February 2016. The Order sets the rate for revaluing SERPS/S2P, as well as GMPs in contracted-out DB schemes, in line with the movement in average earnings.  This is set at 2%, reflecting the increase in average earnings in Great Britain in the year to September 2015. The Order is due to come into force on 6 April 2016.

Department of Health publishes response to consultation on NHS pension scheme legislation

The Department of Health published the Government’s response to the consultation on the draft National Health Service Pension Scheme, Injury Benefits and Additional Voluntary Contributions (Amendment) Regulations 2016 on 3 March 2016.

The updated regulations, which amend the National Health Service Pension Scheme Regulations 1995, were laid before Parliament on the same day.

DWP response to consultation on Better Workplace Pensions: Reducing regulatory burdens and minor regulation changes

On 1 March 2016, the DWP published their response to the fourth Chapter of the consultation, having responded to Chapter 3 on 1 February 2016.

Chapter 4 sought views on proposals to update the regulatory requirements for investment disclosure and to remove the requirement to obtain an auditor’s statement about contributions from large multi-employer schemes.

Having considered the responses received, the Government decided to proceed with its proposed approach and the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) (Amendment) Regulations 2016 were laid before Parliament on 1 March 2016.

DWP publishes employer pension provision findings

On 7 March 2016, the DWP published the Employers’ Pension Provision survey 2015 (carried out by IFF Research), looking at the current nature and extent of pension provision among private sector organisations.

The survey provides data on the early impact and experiences of automatic enrolment into workplace pensions for large and medium employers, and the expectations and plans of small, micro and new employers, who are yet to start the process.

Key findings included the following:

  • participation in workplace pensions has more than doubled following automatic enrolment
  • fewer than one in ten automatically enrolled workers opt out
  • given the employer population and staging profile, the full impact of automatic enrolment is still to be felt in terms of overall access to workplace pension provision in Great Britain

The DWP plans to use the findings to inform its evaluation of workplace pension reforms and ongoing development of automatic enrolment policy.

DWP announces State Pension age review and publishes terms of reference

On 1 March 2016, the DWP published an independent report entitled “State Pension age review: terms of reference”. This report sets out the terms of reference for John Cridland’s independent review of the state pension age, which was announced the same day.

The 2014 Pensions Act requires SPA to be reviewed during each Parliament. The review is to consider changes in life expectancy, wider changes in society and to help ensure that the state pension remains sustainable for generations to come.

The report must be submitted to the Secretary of State by January 2017. In turn, the Government’s final report, which will consider the recommendations from the review, must be published before 7 May 2017.

The review will be forward looking and will not cover the arrangements which are already in place up to April 2028.

HMRC: Pensions Tax Manual updated for annual allowance changes

HMRC has published a number of updates to its Pensions Tax Manual, including measures enacted by the Finance (No.2) Act 2015.

Among other things, the updates include guidance on the tapered annual allowance, which will come into effect from the tax year 2016/17, and the transitional rules for pension input periods.

For more information on the changes made by this Act, please see our Alert.

HMT: pensions tax changes dropped from the Budget?

According to press reports, the possible changes to pensions tax relief first mooted in the Summer Budget 2015 have been put on hold, at least for now.

However, there has been no official statement from HMT as yet, and we await the Budget on 16 March 2016 for confirmation of the Chancellor’s position.

HMT announcement on protecting the GMP of public sector workers

HMT announced on 1 March 2016 that, in response to the introduction of the new State Pension in April 2016, the Government will continue to “price protect” the GMP of public sector workers. This means that those who reach SPA on or after 6 April 2016 and before 6 December 2018 – when SPA equalises for men and women – will receive a fully indexed public service pension for life.

The Government is expected to launch a consultation this year on how to address this issue in the longer-term, recognising the increased value of the new state pension, and seeking to balance simplicity, fairness and cost for members, public service pension schemes and the taxpayer.

Independent Review of Retirement Income report published

On 2 March 2016, The Independent Review of Retirement Income published its report and a summary of responses to its consultation paper. The study was led by Professor David Blake, director of the Pensions Institute at Cass Business School.

The review was launched on 29 May 2014, by Rachel Reeves MP, then Shadow Work and Pensions Secretary, to look at how to boost DC savers’ retirement income following the introduction of the Coalition Government’s “freedom and choice” pension reforms announced in the 2014 Budget.

The report entitledWe Need a National Narrative: Building a Consensus around Retirement Income” surveyed “key industry players” and sets out a number of recommendations

ONS publishes Annual Survey of Hours and Earnings

On 3 March 2016, the ONS published their Annual Survey of Hours and Earnings Pension Tables for 2015.

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.

The main findings from the data were as follows:

  • workplace pension scheme membership has increased to 64% in 2015, from 59% in 2014
  • however, in 2015, 87% of employees in the public sector had a workplace pension compared with 55% of private sector employees
  • 40% of employees with workplace pensions made low contributions (less than 2% of pensionable earnings) in 2015, up from 33% in 2014.

Persons with significant control regime and corporate trustees

From 6 April 2016, most companies will be required to identify and record the people or legal entities that own or control them. Trustee companies must take reasonable steps to determine whether any individual or legal entity must be recorded in a “persons with significant control” (PSC) register and confirm the details which must be provided.

Failure to comply with the requirements (including certain deadlines for serving notices) is a criminal offence.

For full details, please see our Alert.

PPI publishes “The under-pensioned 2016” report

On 1 March 2016, the PPI published a report entitled “The under-pensioned 2016”, in which it explores differences in pension income over the last two decades and examines how the position may change in the future.

Previous PPI research concluded that women, disabled people and people from ethnic minority groups are more likely to have the characteristics associated with lower pension incomes. The 2016 report revisits the earlier work and explores how state and private pension incomes have changed for people from these groups, as well as for carers and the self-employed.

The report measures whether, and by how much, differences in pension income have reduced and how they might evolve in future, in the light of recent policy developments.

TPR launches redeveloped Trustee toolkit

TPR relaunched its Trustee toolkit on 7 March 2016. The toolkit provides a free, online learning programme for occupational pension scheme trustees.

In answer to user requests, the toolkit has been redesigned for use on tablets and aims to provide a smoother experience for customers.

Among new features is the ability to review assessment results so that trustees can focus their training on these areas. Trustees will also build up a history of their assessments, which will help scheme chairs and secretaries to evidence levels of training among their scheme’s trustees.