Articles in this edition cover:
- Access to pension savings inquiry launched
- Pensions Dashboards news
- Pension rates roundup
- HMRC Pension Schemes Newsletter 128
- Timetable for secondary legislation set out by the Pensions Minister
- Government to consult on a simple annual pension statement
- Pension Scams Industry Group update
- TPR publishes revised 15-year Corporate Strategy
- Managing Pension Schemes Service Newsletter
- Tax day update
- Number of advisers offering DB transfer advice falls by half
- PASA launches "Data Management Plan Guidance"
- FCA makes RPI and CPI adjustments changes to DB transfer guidance
- Fraud Compensation Fund (FCF) could start to process pension fraud claims within 18 months
- TPR consults on new criminal sanctions policy
- DWP open consultation on "Strengthening The Pensions Regulator's Powers"
- UK Uber drivers get pension rights
- TPR consultation on first phase of single code of practice
- MaPS to launch single consumer service
- TPO publishes Panels and Independent Financial Advisors
- Pensions fraud suspect extradited to UK
- HMRC Countdown Bulletin 54
- FCA confirms finalised guidance for advising on defined benefit transfers
- TPO publishes factsheet on Early Resolution Service (ERS)
- HMRC deadline for Trust Registration Service
- Government publish response to public service pensions GMP indexation consultation
- DWP open consultation: "Incorporating performance fees within the charge cap"
The Work and Pensions Committee (WPC) has launched an inquiry into access to pension savings.
The Committee will look at what options are open to people when they access their pensions and the advice and guidance available.
On 28 March 2021, the WPC also published a report, "Protecting pension savers – five years on from the pensions freedoms: Pension Scams".
The report calls on the Government to "act quickly and decisively" to protect pension savers and warns that commonly cited figures of the scale of pension scamming are likely to underestimate the problem substantially.
The Pensions Administration Standards Association (PASA) has published guidance on the pensions dashboard for UK schemes, trustees and providers, detailing how to get ready for the project.
The guidance sets out how schemes can get ready for the pensions dashboards and what schemes should be doing now to incorporate the dashboard requirements.
Among the recommendations were implementing an ongoing strategy for the continuous, high-quality maintenance of all pension data and taking technical steps towards dashboard compliance as part of other data projects, such as Guaranteed Minimum Pension (GMP) projects.
Step-by-step guides for determining the accessibility and accuracy of pension records were included.
PASA Dashboard Working Group chair, Chris Connelly, commented: "The main message with this guidance is a very clear one. You should start preparing now!"
The Pensions Dashboard Programme (PDP) have published a blog outlining the progress made in creating an “onboarding strategy” and what pension providers should do next.
Head of Onboarding at the PDP, Paul Noone, recommends that if providers have not started to identify a strategy for connecting to the dashboard ecosystem, they should "work with their system team or provider and their pension administration team or supplier to understand the options available and begin work on the best solution".
PDP will be issuing further details in due course on the technical architecture for the ecosystem.
The Guaranteed Minimum Pensions Increase order 2021 was made on 1 March 2021 and specifies 0.5 per cent as the amount by which the GMP element of an individual's occupational pension entitlement must be increased for the tax year 2021/22. This comes into force on 6 April 2021.
On 11 March, the Finance Bill 2021 was published. The Bill confirmed that the Lifetime Allowance is being frozen at its current level of £1,073,100 until 6 April 2026. At that time, unless specific action is taken, the allowance will then again start attracting annual CPI increases.
The Bill also confirmed that until 5 April 2026, the income tax personal allowance and higher rate threshold would be maintained at the uplifted 6 April 2021 levels. £12,570 and £50,270 respectively.
The Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2021 was made on 15 March 2021, and comes into force on 6 April 2021. The order sets out the revised amounts for 2021/22 for the upper and lower thresholds of the AE qualifying earnings band and AE earnings trigger.
The earnings trigger remains at £10,000 when the qualifying earnings lower limit will be £6,240, and the upper limit will be £50,270.
The latest edition of HMRC's pension schemes newsletter was published on 4 March 2021. This edition had articles on:
- Spring budget 2021 – annual allowance and lifetime allowance
- Extension to temporary changes to pension process as a result of coronavirus
- Managing Pension Scheme service – practitioner registration and authorisation features
- Relief at source – Scottish and Welsh Income Tax rates, members residency status for 2021 to 2022 relief at source, annual return of information, APSS590 declaration
- Increasing the normal minimum pension age – consultation on implementation
- Public service pension schemes – changes to transitional arrangements to the 2015 schemes.
A written statement made on 2 March 2021, by the Minister for Pensions and Financial Inclusion, Guy Opperman, set out a timetable for secondary legislation made under the Pension Schemes Act 2021.
Amongst other things the timetable stated:
- On pension scams and Collection Defined Contribution Schemes, the Government will consult on draft regulations in early summer with commencement on the scams measures from early Autumn 2021
- On the Pensions Dashboard, the Government will consult on proposed regulations later this year and lay draft regulations for debate in 2022. Go live still expected in 2023
- On TPR's new powers, most draft regulations are to be consulted on in Spring 2021 with the commencement of the new powers and criminal measures in Autumn 2021
- On the duty to give notices and statements to TPR in respect of certain events, draft regulations are to be consulted on later this year for commencement as soon as practical after that.
Guy Opperman stated that the Government would be consulting on mandating the use of simpler annual statements.
Opperman also suggested that there could be a greater push for providers to engage in a "pension statement season", a short period each year where "people are receiving the statements to reinforce the normalisation of pension saving".
He added: "We are building on the participation in Auto Enrolment, but we are also understanding that there is a growing likelihood that people will have a multitude of different jobs and therefore multiple pension pots and multiple statements".
Guy Opperman has written to around 90 pension schemes stating that they must begin sharing data with the Pension Scams Industry Group (PSIG) to create a clearer picture of the scale of pension scams.
Opperman said that greater data sharing, alongside the improved pension transfer rules in the Pension Schemes Act will ensure savers are better protected from "unscrupulous scammers".
The Pensions Regulator has also called on pension schemes to report suspected scams following a "concerning" long term drop in reporting.
Figures from Action Fraud showed that the number of pension scam reports fell from 1,788 in 2014 to 358 in 2020.
TPR warned that the lack of data from pension scam reports could be "hiding the true picture" of the pension scams landscape.
TPR has published a revised 15-year Corporate Strategy that sets out its blueprint of future pensions regulation, aiming to "make workplace pensions work" for savers.
The strategy sets out five priorities that the regulator will "immediately start to deliver".
These include the primary goal of protecting pension savers' investments, which includes working to ensure defined benefit (DB) schemes are funded and can continue to rely on the Pension Protection Fund (PPF). It is also driving consolidation where it is in savers' best interest, quick intervention when employers do not pay contributions, and protecting savers from scammers and cyber-related risk through collaboration with partner agencies.
HMRC's Managing Pension Scheme Service latest Newsletter was published on 16 March 2021. This edition has articles on:
- Pension Scheme practitioners
- Existing practitioner authorisations
- Accessing a locked Accounting for Tax Return
- Updating your address
- How you can help us
- Signing into online services
- Pension Scheme accounting.
The "Tax Day" held on 23 March 2021, passed by with relatively little impact from a pension point of view.
The Government did state that it will be addressing some pension tax difficulties specifically raised by its remedies to the McCloud case.
It also confirmed that the Government would be reviewing the appropriate taxation framework for Superfund. This work will proceed alongside the work underway on the development of the appropriate Superfund regulatory regime.
A report published by Aegon and Next Wealth found that the proportion of advisers offering DB transfer advice fell by nearly half to 22% in 2021, compared to 41% in 2020.
Steven Cameron, Pensions Director at Aegon, commented: "Since the pension freedoms were introduced in 2015, the FCA has had a strong focus on improving the suitability of advice on DB pension transfers, and the latest amendments to its rules took effect from 1 October 2020. While the FCA has noted improvements in the market, we have seen a worrying and very sharp reduction in the number of firms providing this advice over the last few years... What's particularly concerning is the rate of firms exiting the market while the demand for such advice remains high. The research highlights an acceleration, with the number of firms exiting far exceeding adviser predictions. Over the last year, our research shows this has been driven by general business risks, PI cover challenges and FCA supervision activities. This sets alarm bells ringing as we need to make sure the ongoing supply of advice meets demand or people will be unable to explore their statutory right to transfer."
On 22 March 2021, PASA launched its Data Management Plan Guidance setting out the purpose of a data management plan and the information it may be expected to include.
Kristy Cotton, Chair of the PASA Data Working Group, noted: "A Data Management Plan ("DMP") is a critical scheme document and forms part of good scheme governance. Its implementation offers a means of documenting the data held by a pension scheme and a policy for managing it effectively. We would encourage all trustees to review the completeness, accuracy and appropriateness of their data and integrate a DMP as part of their wider risk management framework."
On March 3, the FCA confirmed that it would amend its guidance for firms on how to calculate redress for unsuitable DB pension transfers in mid-March 2021 to reflect Government changes to the way the Retail Prices Index (RPI) inflation measure is calculated from 2030.
The RPI change means that from February 2030, the -1% adjustment to the RPI assumption used in the guidance to calculate the CPI assumption will not reflect the assumed difference between the RPI and the CPI. It will be too large, and some consumers may not receive the correct amount of redress. This will affect consumers who transfer out of DB pensions that are uprated annually in line with the CPI.
The FCA intend to update the CPI adjustment in the guidance by mid-March 2021 and will do so without prior consultation (consulting on this will delay the correct amount of redress for consumers). They will backdate the change to 25 November 2020. In practice, they would expect it to apply only to calculations carried out from the following quarter's first business day (i.e. 1 January 2021).
In March, a meeting of the Transparency Task Force heard that the FCF could begin processing cases through to settlement within 12-18 months. Within the PPF, the FCF was established to compensate pension schemes that suffered losses as a result of dishonesty. Since the FCF's inception, it has only paid compensation to ten schemes amounting to around £5m due to doubts about the claimants' eligibility.
PPF Director of Strategy and Policy David Shaw told the meeting that the High Court ruling in PPF v Dalriada Trustees, which clarified that any occupational scheme liable to pay the FCF levy could qualify for compensation in the event of fraud, was "very good news for members in such schemes". He said: "We also believe it to be the start of a relatively big step change for us in terms of the running of the fund", adding that the FCF has "already received around seven claims with a potential value of more than £14m from schemes in this sort of circumstance".
This Act introduces two new criminal offences: the offence of avoidance of employer debt and the offence of conduct risking accrued scheme benefits. The offences are not yet in force but are expected to be by Autumn 2021, and the consultation closes on 22 April 2020.
DWP open consultation Strengthening The Pensions Regulator's Powers: Contribution Notice and Information Gathering Powers Regulations 2021
The DWP has published a consultation seeking the views on the proposed drafting of two sets of regulations concerning The Pensions Regulator's powers following changes introduced by the Pension Schemes Act 2021.
The purpose of this consultation is to draw interested parties' attention to the proposed draft regulations on:
- The Pensions Regulator (Contribution Notices) (Amendment) Regulations 2021 which outline the 'employer resources test'
- The Pensions Regulator (Information Gathering Powers and Miscellaneous Amendments) Regulations 2021
- The DWP welcomes views on any impacts, including any unintended consequences that the draft regulations might have on specific groups. These regulations are expected to come into force in October 2021.
Uber announced that its 70,000 UK drivers would get a guaranteed minimum wage, holiday pay and pensions. This is less than a month after the Supreme Court ruled Uber drivers are "workers". Under the changes, UK drivers will automatically be enrolled into a pension plan with contributions from Uber and the driver.
TPR's 15 existing codes of practice are set to be transformed into a new online code providing one up-to-date and consistent source of information on scheme governance and management. TPR has launched a consultation on the first phase of its work – bringing 10 of the current 15 codes together as one. While consolidating these ten codes, TPR says it has reduced the number of pages by nearly half. The 10-week consultation, running until May 26, offers governing bodies and pensions professionals the chance to engage with and respond to the proposed new code.
The Money and Pensions Service (MaPS) announced plans to launch a new consumer service to replace the Money Advice Service, The Pensions Advisory Service and Pension Wise and consolidate into one brand called MoneyHelper. This service will provide money and pensions guidance over the phone, online and face-to-face, which will be launched on June 21. Pension Wise, which provides guidance for people aged 50 and over about their pension options, will continue as a named service under the MoneyHelper brand.
On 18 March, The Pensions Ombudsman (TPO) published Panels and Independent Financial Advisors. Historically, pension scheme administrators, trustees and employers have expressed concern about the scope of their responsibilities in providing financial advice to members and have hesitated in recommending or facilitating access to particular financial advisers. The generic information and guidance sets out TPO's approach to the provision of factual information in respect of independent financial advisers.
A 61-year-old man has been extradited from Alicante in connection with a pension fraud prosecution brought by The Pensions Regulator (TPR). This is the first time TPR has worked with the police to secure the extradition of a suspect. Alan Barratt was arrested in Alicante, Spain, under a European Arrest Warrant issued by Westminster Magistrates' Court and then extradited to the UK. Mr Barratt will appear in Court with two other people who TPR also charges with fraud by abuse of position arising from their roles as trustees of pension schemes. TPR's case argues that between 2012 and 2014, 245 savers were persuaded to transfer their pension savings totalling £13.7m into 11 pension schemes, controlled by the defendants.
On March 30, the FCA confirmed they had finalised their DB transfer guidance for advisers. It remains the FCA's view that it is in the best interest of most consumers to stay in their DB pension. Where an individual seeks advice to transfer, they expect firms to give advice that is suitable and appropriate for their needs and situation. The Finalised Guidance will help firms to identify any weaknesses in their existing processes so that they can put into place an appropriate framework for managing and delivering suitable advice.
The FCA and The Pensions Regulator (TPR) have also published a Guide for Employers and Trustees. This sets out what employers and trustees can do to help members with financial matters without needing to be authorised by the FCA, including examples to illustrate what they can and can't do.
TPO has published a factsheet about its ERS. This factsheet provides guidance for applicants about the service (ERS), explaining what it is, how it operates, and its options.
TPO published another factsheet called "How we investigate complaints". This gives important information about the investigation process.
The Chartered Institute of Taxation reported HMRC's announcement that the deadline for registration of the trusts required to register under the Fifth Money Laundering Directive has been extended until summer 2022. HMRC confirmed that the IT system to administer the registrations would open in summer 2021, rather than March 2021, as originally planned. The legislation will be amended to provide a period of approximately 12 months for registration from the date when the IT system opens.
The Government has published its response to the above consultation. The consultation, launched in October 2020, focused on the options available to ensure that the Government continues to meet past commitments made to public service employees regarding the full indexation of public service pensions, including any GMP element related to membership of a public service pension scheme.
In the response, the Government has decided to make full GMP indexation the permanent solution for public service pension schemes.
The DWP has launched a consultation on proposed measures to allow occupational Defined Contribution pension schemes to smooth performance fees within the charge cap, and a call for evidence on look-through in relation to charge cap compliance.
The consultation closes on 16 April 2021 and the Government aims to publish a response to this consultation in June 2021.