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

The Employer-Financed Retirement Benefits (Excluded Benefits for Tax Purposes) (Amendment) Regulations 2016

The Employer-Financed Retirement Benefits (Excluded Benefits for Tax Purposes) (Amendment) Regulations 2016 (“the Amendment Regulations”) were made on 31 October 2016.

The Employer-Financed Retirement Benefits (Excluded Benefits for Tax Purposes) Regulations 2007 (“the 2007 Regulations”) exempt specified benefits under an employer-financed retirement benefits scheme from a charge to tax under section 394 of ITEPA 2003.

The Amendment Regulations amend the 2007 Regulations to exempt the provision of certain trivial benefits to or in respect of a former employee that would have been exempted had they been provided to or in respect of a current employee.

The new regulations come into force on 1 December 2016.

Brexit Update

“Article 50” of the Lisbon Treaty provides that “any Member State may decide to withdraw from the European Union in accordance with its own constitutional requirements”. To trigger the exit process, the UK is required to “notify the European Council of its intention” to leave; it will then have two years to agree its future relationship with the Union.

The Government had suggested that it had set a deadline of the end of March 2017 for triggering Article 50. However, on 3 November 2016, the High Court ruled that Parliament must vote on whether this process can begin, following a judicial review application.

The Government is appealing and a further hearing is expected in December 2016.

CPS publishes report on the state pension

On 3 November 2016, the Centre for Policy Studies (“CPS”) published a report entitled The State Pension: No Longer Fit for Purpose.

In the report, author Michael Johnson urges the Government to take action on the state pension, claiming that it “is facing fiscal calamity”. He proposes in its place a residency-based “Senior Citizens’ Pension” and a “Workplace ISA”, with the state pension being put into run-off so that from 2020 no further entitlements would be created.

DWP publishes new state pension communications tracking research

On 2 November 2016 the DWP published the findings of research to track awareness and understanding of the new state pension that was introduced from 6 April 2016, as well as the actions people are taking in response to it. It also tracks awareness of the state pension top up, which is available for people who reached SPA before 6 April 2016.

HMRC publishes Pension Schemes Newsletter 82

Published on 4 November 2016, HMRC’s Pension Schemes Newsletter 82 sets out its latest updates and guidance on pension schemes.

Among other things, this newsletter clarifies the date a member is protected for lifetime allowance purposes, and gives an update on the progress of the annual allowance calculator.

IASB to consider discount rate requirements

On 2 November 2016, the International Accounting Standards Board (“IASB”) published its Work Plan for the period 2017-2021.

In a feedback statement on its 2015 Agenda Consultation, the IASB noted that “there is currently an inconsistency in the measurement of pension benefits that depend on asset returns. For those benefits the estimates of cash flows are inconsistent with the discount rate”. The Board has therefore added to its research pipeline a project to consider whether it would be feasible to eliminate that inconsistency. The IASB confirm that no other work on IAS 19 is currently planned.

NAO publishes report on introduction of the new state pension

On 3 November 2016, the National Audit Office (“NAO”) published a report on the introduction of the new state pension.

According to the report, the launch of the new state was successfully managed by the DWP, but it is not yet clear whether the simplified system will aid understanding of retirement savings and encourage people to save more for their retirement.

The NAO sets out recommendations aimed at helping the DWP respond to the challenges of achieving operational efficiencies and improving people’s understanding of their future pension planning.

TPR launches enforcement action on BHS

On 2 November 2016, TPR confirmed that, following its investigation, it had formally begun enforcement action to seek redress on behalf of the BHS pension schemes.

TPR has sent Warning Notices to Sir Philip Green, Taveta Investments Limited, Taveta Investments (No. 2) Limited, Dominic Chappell and Retail Acquisitions Limited, setting out the arguments and evidence as to why it believes the respondents should be liable to support the BHS pension schemes.

TPR Chief Executive Lesley Titcomb said: “Issuing Warning Notices at this time reflects the outcome of our investigations and that we are yet to receive a sufficiently credible and comprehensive offer in respect of the BHS schemes.”

TPR’s case teams will consider any comments and representations made before the case is passed to TPR’s Determinations Panel.

Work and Pensions Committee calls for triple lock to be scrapped

On 6 November 2016, the Work and Pensions Committee published its Third Report of Session 2016-17, on “Intergenerational fairness”.

Amongst other things, the report recommends replacing the “triple lock”, stating that while “it has made a valuable contribution in increasing the relative value of the state pension”, retaining it “would, however, tend to lead to state pension expenditure accounting for an ever greater share of national income. At a time when public finances are still fragile, this is unsustainable.” A potential alternative means of making the state pension more sustainable – by accelerating increases in SPA – is dismissed as affecting the young and those socio-economic groups with lower life expectancies disproportionately.

Barnardo’s v Buckinghamshire – 2 November 2016 (Court of Appeal)

In 2015, the High Court had considered whether the trustees of the Barnardo Staff Pension Scheme had power under the rules of their scheme to select the index by reference to which increases in pensions in payment and to deferred pensions would be calculated.

Upholding the decision of the High Court, the Court of Appeal concluded that the trustees did not have power to select the indexes.

For further information, please see our case report.