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
- FCA confirms final rules on improving the quality of pension transfer advice
- FCA consults on new rules to improve the approach to open-ended funds investing in illiquid assets
- HMRC publishes Countdown Bulletin issue 37
- LGPS amendments: consultation published
- News from the Conservative Party Conference
- PPF updates Levy Data Correction Principles
- PPI publishes report on “ESG: past, present and future”
- Mrs S (PO-15486) Incorrect CETV provided for pension sharing order
On 4 October 2018, the FCA published new rules aimed at improving the advice people receive when considering transferring their pension. The policy statement confirms that the FCA is taking forward most of the proposals originally put forward for consultation in March 2018. The consultation had proposed further changes to the FCA’s rules and guidance on advising on transferring from safeguarded benefit (largely, DB) schemes.
The changes include a requirement for all pension transfer specialists to hold a specific qualification for providing advice on investments by October 2020, enabling advisers to identify whether a proposed pension scheme and investment solution is consistent with the client’s needs and objectives. The FCA also expects advisers to consider their client’s attitude to, and understanding of, the general risks associated with a transfer, in addition to their attitude to investment risks.
A proposal to amend the definition of a pension transfer has not been pursued, as the consultation showed that the suggested change “had not achieved the simplification and clarity” intended.
As part of the consultation, the FCA also sought views on whether to intervene in charging structures, including whether to ban contingent charging (ie where a fee for advice is only paid when a transfer goes ahead). It also asked whether restrictions on charging models had an impact on access to advice. Responses to the consultation suggested that contingent charging was not the main driver of poor outcomes for customers, and as the FCA’s supervisory work to date has identified a number of other causes of poor advice, it will carry out further work in this area. If necessary, the FCA will then consult on new interventions in the first half of 2019.
On 8 October 2018, the FCA published a consultation on new rules and guidance aimed at reducing the potential for harm to investors in funds that hold illiquid assets, particularly under stressed market conditions. Open-ended funds can receive significant inflows from institutional investors who are managing money on behalf of others, such as pension schemes.
The measures also aim to “support the FCA’s market integrity objective and help address financial stability concerns”, and the consultation follows the publication of a Discussion Paper on the topic in February 2017.
The FCA seeks feedback by 25 January 2019.
On 5 October 2018, HMRC published issue 37 of its “Countdown Bulletin”, which provides information for schemes following the ending of DB contracting-out.
The latest edition of the bulletin includes information on:
- financial reconciliation, including a de minimis limit under which schemes in deficit will not be billed by HMRC
- problems with data quality in queries submitted to HMRC
- contribution adjustment action as a result of scheme reconciliation (including the process to obtain trustee approval before HMRC adjusts contributions where required).
On 4 October 2018, the Ministry of Housing, Communities & Local Government (“MHCLG”) published a consultation on proposals to amend the Local Government Pension Scheme (“LGPS”) in England and Wales. The amendments have been proposed in response to recent legal judgments concerning survivors’ benefits (including Walker v Innospec, and Brewster), to meet existing policy objectives, and to give some flexibility to respond to future developments.
The proposed amendments include:
- survivors of registered civil partnerships or same-sex marriages receiving the same benefits as those provided to widows (rather than those equivalent to widowers), from the date of the introduction of civil partnerships and same-sex marriages. (The Government has consulted separately on this issue in the joint HMT and DWP review of survivor benefits in occupational pension schemes, and will respond on this consultation in due course.)
- creating a power to issue statutory guidance on the operation of the LGPS rules, with the aim of delivering greater standardisation of approach across funds, in particular, on how the interpretative duties under the Human Rights Act are met
- a technical amendment in relation to consent for specific early retirement cases.
The consultation closes on 29 November 2018.
At the Conservative Party Conference on 2 October 2018, Prime Minister Theresa May announced that heterosexual couples will be able to enter into civil partnerships. The move follows a decision of the Supreme Court in June 2018 that restricting civil partnerships to same-sex couples was incompatible with the European Convention on Human Rights.
The PPF has updated its Levy Data Correction Principles, which sets out the key principles that the PPF will apply when considering a levy data correction request from schemes and advisers. It covers the types of correction that the PPF will consider, and factors when considering a correction request or late levy review applications.
The PPI has published a report on environmental, social and governance (“ESG”) factors in the context of pension fund investing. Amongst other things, it looks at barriers to ESG investing, the current legal position of schemes in relation to ESG, and trustees’ and IGCs’ perceived legal responsibilities.
TPO found that Mrs S was entitled to compensation for legal and IFA costs that had resulted from the scheme’s provision of an incorrect CETV. The CETV had been used to calculate Mr and Mrs S’s divorce settlement.
For further detail, please see our case report.