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

Bank of England and Financial Services Act receives Royal Assent

The Bank of England and Financial Services Act 2016 (“the Act”) was given Royal Assent by Parliament on 4 May 2016, as announced in HMT’s press release.

Among other things, the Act aims to help consumers by extending the scope of the Pension Wise service, so that pensioners who are able to sell their annuity income on the secondary market from April 2017 can access free, impartial guidance.

The Act also introduces further amendments to FSMA in relation to the secondary annuity market. It places an obligation on the FCA to make rules requiring certain authorised firms to check that holders of a “relevant annuity” have received “appropriate advice” (both terms to be defined by HMT under delegated powers) before they may sell their annuity.

The Act also amends the Pensions Schemes Act 2015 to correct an omission; “appointed representatives” of authorised financial advisers will now be permitted to advise on the conversion and transfer of “safeguarded benefits”, for the purposes of the advice requirements.

Finally, the Act amends FSMA to require the FCA to make rules prohibiting authorised persons from imposing specified early exit charges on members seeking to take advantage of the retirement freedoms.  The FCA intends to implement the prohibition by the end of March 2017, and it is expected that it will set out its next steps on the cap imminently.

Enterprise Bill receives Royal Assent

On 4 May 2016, the Enterprise Bill received Royal Assent and became the Enterprise Act 2016. The Act gives effect to a number of Government commitments aimed at supporting the growth of “British enterprise”.  Amongst the measures it contains is the introduction of the cap (of £95,000) on exit payments from public sector employment. The cap includes employer pension contributions and early access to unreduced pensions.

Brexit: House of Commons Library publishes briefing paper on EU referendum campaign

The House of Commons Library published a briefing paper on the EU referendum campaign at the end of April. The briefing includes information about the timetable for the campaign, and on the rules that apply to campaign activity.  The referendum will be held on 23 June 2016.

For further information on how the referendum could affect UK pensions, please see our recent Alert.

FRC consults on Technical Actuarial Standards

On 5 May 2016, the FRC published for consultation proposed changes to its Technical Actuarial Standards (TAS), which includes TAS 300 setting out the standards applicable to pensions actuarial work.

At the same time, the FRC published a feedback statement on its consultation, A new framework for Technical Actuarial Standards, which includes the new standard, TAS 100.  In July 2015, the FRC had agreed to defer the introduction of TAS 100 (the generic technical actuarial standard proposed) until changes to specific TASs were ready to be introduced, in order to avoid two sets of changes in a short period of time.

The proposed scope of TAS 300 covers four broad areas of actuarial work:

  • work which affects the funding or financing of private and public sector pension schemes
  • work underpinning the derivation of actuarial factors used to calculate benefits such as transfer values, lump sums at retirement and early retirement pensions
  • work to support incentive exercises such as ETVs or PIEs, and
  • work for governing bodies concerning changes which may affect members’ benefits from bulk transfers or modifications of accrued benefits.

All other technical actuarial work in pensions is in the scope of TAS 100.

Melanie McLaren, Executive Director, Audit at the FRC said: “High quality technical actuarial work is vital in promoting trust in financial markets among the millions of UK pensioners and savers and the many investors who allocate capital. The proposals are designed to provide further confidence to users who rely on actuarial information.  The standards are proportionate and we believe the simplified structure should make the standards be easier to apply.”

The consultation closes on 5 August 2016.

PASA announces revised accreditation standards

PASA – which was created with the aim of providing an independent infrastructure to set, develop, guide and assess administration standards – issued revised accreditation standards on 5 May 2016.

The aim of the changes is to clarify what administrators need to do to gain accreditation, and to make the initial stage of accreditation more straightforward. Kim Gubler, Director at PASA, commented that “good governance requires that we continually assess how we are doing things and make sure the advice and guidance we are giving to market is current and appropriate”.

Pension Wise dashboard statistics

HMT has updated its Pension Wise statistics as of May 2016, to show that consumer demand for the Pension Wise service has continued to increase, with 7,010 appointments in March 2016, compared with 5,916 in February 2016. Since its inception, there have been 2.44m visits to the website.

PPI publishes report on Value for Money in DC workplace pensions

On 4 May 2016, the PPI published a report into value for money in DC workplace pensions, commissioned by Standard Life.

The report highlights that, while there is no single definition of value for money in pensions, there is consensus that value for money is about more than simply cost. Although costs and transparency of costs are important, the PPI notes that consideration of value for money should also include elements such as administration, communication with members, and governance.  The report also considers three outcomes are likely to be seen as positive indicators of value for money by members: pension pot value, the security of the pot, and the level of trust in the scheme.

PPI issues Briefing Note 81

The PPI released its latest Briefing Note (81) (Lifetime ISAs: pension complement or rival?), on 5 May 2016. The Briefing Note explains the Lifetime ISA which was announced in Budget 2016.

PPF publishes factsheet clarifying role

On 3 May 2016, the PPF published a factsheet clarifying some commonly held misconceptions. The factsheet covers what the PPF is, and in basic terms, how it operates, including its relationship with the State and TPR.  The factsheet also addresses the question as to “whether current potential claims threaten the PPF”, with the PPF commenting that “even in the current climate” it remains “robust…and well-equipped to meet the challenges that exist”.

TPR’s powers: House of Commons Library publishes briefing paper

The House of Commons Library published a briefing paper on 4 May 2016 looking at TPR’s powers to protect pension scheme benefits, examining its anti-avoidance powers and some examples of how they have been used in practice.

TPR: revised DC Code

TPR’s revised DC code (“the Code”) was laid before Parliament on 9 May 2016. The Code will remain in draft form for a 40 day period, after which it will be officially ‘made’, coming into force in early July.

At the same time, TPR published its response to the consultation on the Code. TPR confirmed that the vast majority of the 51 respondents to the draft Code were supportive of the approach taken.  For further details, please see our response.

One area where TPR received a number of comments was around the standard proposed for the investment of contributions (ie that they must be invested within three working days). In light of these responses, TPR amended the standard to reflect the fact that not all schemes operate daily dealing cycles, and where this is not the case, that investment should take place on the next available dealing date (if not within three days).

The Code now also refers to legislation that was not yet in force at the time of the consultation; in particular, the ban on member-borne commission charges and the requirement to give generic risk warnings.

Finally, the majority of respondents agreed that the name of the Code should reflect that it applies to all schemes offering DC benefits, rather than only pure DC schemes, and therefore the title has been changed accordingly.

Prometric Ltd v Cunliffe (23 March 2016)

The Court of Appeal has upheld an appeal by Prometric Ltd (“Prometric”), against an order made in the High Court.

Mr Cunliffe had brought a claim, alleging that he was contractually entitled to membership of a DB scheme. Prometric had applied for an order striking out the claim, or alternatively for summary judgment dismissing the claim, on the ground that his Particulars of Claim disclosed no reasonable ground for bringing the claim, and the claim had no real prospect of success.  The High Court had originally refused Prometric’s requests.

For further details, please see our case report.