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DWP proposes tough authorisation and supervision regime for master trusts
The government has published its plans for the new master trust authorisation and supervision regime. The regime is expected to come into force in October 2018, and will require master trusts to meet five new criteria before they can be authorised to operate. Both new and existing master trusts will need to comply – existing trusts must wind up and transfer members to another scheme if they cannot meet the criteria. Authorisation will be subject to a one-off fee (of up to £67,000 for existing schemes), although schemes will be assessed on an ongoing basis. Trustees will need to meet a "fit and proper" requirement, involving integrity, conduct and competency tests. Master trusts must also meet criteria relating to funding and continuity strategies, as well as administrative and governance arrangements. Scheme funders will need to provide the Pensions Regulator with full audited accounts (even if these are not otherwise required under company law). Schemes without a funder will need to satisfy the Regulator that they have access to sufficient financial resources to be financially sustainable. The consultation on these proposals ends on 12 January 2018.
Work and Pensions Committee probes recent insolvencies
The Chair of Parliament's Work and Pensions Committee, Frank Field, has written to trustees of the Toys'R'Us and Palmer and Harvey (P&H) pension schemes, questioning their actions in light of the financial difficulties of the schemes' employers. The Toys'R'Us UK business is expected to launch a company voluntary arrangement and the closure of 26 stores after its US parent filed for bankruptcy protection, prompting Frank Field to ask how the trustees have been acting to secure the scheme's interests and whether they have been negotiating with the employer. Meanwhile, in response to the news that P&H has been placed in administration, Frank Field has asked whether the trustee has challenged the company's dividend policy. Frank Field has also written to the Pensions Regulator seeking confirmation of the actions it has taken in respect of these schemes. In particular, he has asked whether the Regulator should have acted earlier in response to the preference dividend payments made by P&H during the period since 2009 when the scheme remained in deficit.
Autumn Budget 2017
There were only a small number of changes affecting pensions in the Autumn Budget 2017:
- The lifetime allowance for pension savings will increase in line with the Consumer Prices Index, rising to £1,030,000 for 2018/19.
- The basic State Pension will be increased by the triple lock. The rise in April 2018 will be 3%, a cash increase of £3.65 per week for the full basic State Pension.
- The government wants to support long-term investment by (among other things) giving pension funds confidence that they can invest in assets supporting innovative firms as part of a diverse portfolio. The Pensions Regulator will clarify guidance on investments with long-term investment horizons. With over £2 trillion in UK pension funds, the government considers small changes in investment have the potential to transform the supply of capital to innovative firms.
- From April 2019, tax relief for employer premiums paid into life assurance products or certain overseas pension schemes will be modernised to cover policies when an employee nominates an individual or registered charity as a beneficiary.
Regulator's guide to preparing chair's statement and review of value for money
The Pensions Regulator has published a new quick guide to help trustees produce the annual chair's statement. The guidance does not set out new requirements but clarifies the expectations in the Regulator's defined contribution (DC) code and includes examples of good and poor practice. Poor practice often relates to a lack of detail or explanation in the statement, resulting in a failure to demonstrate how the various legal requirements have been met. There is a checklist for trustees to use and notes to help them complete the statement.
The Pensions Regulator will separately review the way DC schemes assess value for members. The Regulator is particularly concerned about the assessments carried out by small and micro schemes. Over the next few months it will review the chair's statements for a number of these schemes with a view to understanding the challenges for trustees and producing targeted guidance.
HMRC extends deadline for money laundering compliance
Where trustees of an occupational pension schemes have become liable for stamp duty, this now triggers a requirement to register online with HMRC's trust registration service and provide certain information. The original deadline was 31 January 2018, and then on each following 31 January. This initial deadline has now been extended to 5 March 2018. However, the deadline is 5 January 2018 if a scheme needs to register for self-assessment for the first time in respect of 2016/17, and 5 October 2018 if it needs to register for the first time in respect of 2017/18.
HMRC delays removal of VAT exemption for insurers
We reported last month that HM Revenue & Customs has decided to delay ending the VAT exemption for pension fund management services provided by regulated insurers. Withdrawal of this exemption was originally intended to take effect on 1 January 2018, but HMRC has now confirmed it will delay this until 1 April 2019, following discussion with industry representatives.
New approach to PPF rules on bridging pensions
The government has revised planned changes to Pension Protection Fund (PPF) rules for schemes with bridging pensions. It is introducing new rules to prevent members with bridging pensions being better off under the PPF than they would have been under their original scheme. After consultation, the Department for Work & Pensions (DWP) has decided that PPF compensation will reduce along similar lines to the scheme's benefits (rather than by converting bridging pensions into a smoothed flat-rate benefit). The DWP's original proposal had prompted fears of hardship for pensioners facing an immediate drop in income, especially where the bridging element is a high proportion of the member's total pension.
New DWP guidance on safeguarded flexible benefits
The DWP has issued guidance on new requirements for safeguarded flexible benefits which will come into force in April 2018. The requirements cover money purchase benefits which have some sort of guarantee, such as a guaranteed annuity rate. From April 2018 schemes will need to send personalised risk warnings to members with safeguarded flexible benefits when certain trigger events occur. They must also notify members with benefits over £30,000 of the need to take financial advice. The guidance highlights best practice in respect of these communications, and describes transitional provisions which apply to the financial advice requirement (for members who may no longer need to take advice after April 2018).
No change to cap on DC auto-enrolment scheme default funds
The government has decided to retain the current cap on member-borne charges for default investment funds in DC auto-enrolment schemes. The government considers that the 0.75% cap is working broadly as intended, and wants to monitor the impact of measures to increase transparency of transaction costs and to simplify scheme consolidation. In a written statement to Parliament, minister Guy Opperman has confirmed that the next review of the level and scope of the cap will take place in 2020 – and the government expects there will then be a "much clearer case for change".
FCA guidance on redress for unsuitable transfer advice
The Financial Conduct Authority (FCA) has finalised its guidance on calculating redress for members who complain about unsuitable advice to transfer from a defined benefit (DB) scheme to a personal pension. The redress should aim to put the member into the position they would have been in had they not received unsuitable advice. It should reflect the features of the DB scheme, so advisers should consider taking account of any adjustments to the member's pension under the DB scheme (such as a state pension offset).
High Court increases Ombudsman's compensation for distress
Smith v Sheffield Teaching Hospitals NHS Foundation Trust (High Court)
The High Court has found that the Deputy Pensions Ombudsman made a mistake when awarding £500 compensation for distress to a member who had received incorrect information about her pension rights. The healthcare worker was awarded £500 compensation when she was given incorrect information about her NHS Pension Scheme rights over a six-year period. The Court decided that the member had not proved she would have planned her retirement differently and had not therefore proved she had suffered any financial loss. However, the distress caused to the member was far greater than would have been caused by a single instance of maladministration, and so the Court awarded the member compensation of £2,750.
New Work and Pensions Committee inquiry into defined ambition schemes
The House of Commons Work and Pensions Committee has launched an inquiry into the merits of collective defined contribution (CDC) or "defined ambition" pensions. These schemes were defined in law by the Pensions Act 2015, but the government later announced it was postponing bringing them into effect in order to give pensions freedoms time to bed down. This inquiry will cover the role that defined ambition schemes could play in the pensions landscape, the potential benefits to savers and the wider economy, and the legislative and regulatory framework that would be needed. The Committee is asking whether the CDC model would be understood and trusted by savers, or create extra complexity and confusion, and whether there is an appetite for the model amongst employers and providers. It also asks whether seriously underfunded defined benefit schemes could be resolved by converting to CDC.
FSCS warns consumers about scam site
The Financial Services Compensation Scheme (FSCS) is warning consumers to avoid a Russian site claiming to represent the FSCS and asking people to register a claim. Under the banner of Investor Protection Management, the site claims to be a wholly owned subsidiary of the UK compensation scheme and uses the logo of the UK's financial regulators, but the FSCS insists it is not connected with this site in any way.
An elderly army veteran has raised more than £100,000 for charity after completing an 86-mile week-long walk along the River Thames to mark his 86th birthday. Jeffrey Long's endeavours went viral thanks to a tweet from comedian Jason Mountford, who has over a quarter of a million Twitter followers, and Mr Long's fundraising total leapt from £300 to £119,845. According to the Evening Standard, Mr Long finished his walk even though he is currently receiving chemotherapy treatment and suffering pain from his ankle and hamstrings. Last year he celebrated his 85th birthday with an 85-mile canal walk, whilst his 84th birthday involved an 84-mile hike along Hadrian's Wall.
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