1 New pensions freedoms (DC) – Freedom and choice is coming and DC trustees and providers must decide what options to make available to their members. Default funds should be reviewed to ensure they remain suitable and a member communication strategy developed to make individuals aware of their new options and to signpost (and, in many cases, supplement) the new guidance service.
Action: Decide on benefit options that will be available under your plan from April 2015. Update rules and member comms. Review default fund. Read more
2 New pensions freedoms (DB) – Members of DB plans will be able to take advantage of the new pension freedoms by transferring to a DC plan. However, trustees must check that they have received “appropriate financial advice” before doing so. Procedures for authorising transfers (including internal transfers between DB and DC sections of hybrid plans) should be updated to ensure this new legal requirement is met. Trustees of DB plans should not forget that the new flexibilities will apply directly to money purchase AVCs.
Action: Update member comms to refer to new DC benefit options and put in place process for confirming members have received appropriate advice before transferring.
3 New requirements on DC default funds and transaction costs – From April 2015, new legal requirements are expected which will require trustees of DC plans to design default funds in members’ best interests and keep them under review, ensure core financial transactions are processed promptly and accurately and assess whether member-borne costs and charges represent “good value”. Chairs of trustees will be required to prepare a regular statement on this and other matters.
Action: Ensure you are ready to comply with new governance requirements for DC plans and consider how to assess the “value” of costs and charges. Read more
4 New charge cap coming soon – An annual cap on member-borne charges and deductions of 0.75% of funds under management (excluding transaction costs) will apply to default funds of “qualifying schemes” from April 2015. Trustees are responsible for ensuring that the default fund(s) under their plan meets this cap.
Action: Ensure the default fund(s) under your qualifying scheme(s) will meet the new charge cap from April 2015. Read more
5 Action needed to reduce your PPF levy – To reduce your plan’s PPF levy, action must be taken (in most cases) during the first quarter of the year. New rules will be used to determine PPF levies this year and 40% of plans are expected to see an average 150% increase. New rules apply to the certification and re-certification of PPF compliant contingent assets and asset-backed contributions.
Action: Ensure relevant actions to manage your plan’s PPF levy are taken by the relevant deadlines, as these are applied strictly. Read more
6 Holiday pay cases: Pensions implications – The Courts have recently decided that amounts in respect of commission and overtime should be included in holiday pay. As well as having significant HR and payroll consequences, these decisions could impact the benefits and contributions payable under many pension plans. Pensions issues also need to be considered as part of any settlement of historic claims.
Action: Assess impact of holiday pay cases on your pension plans, auto-enrolment and any settlement of historic claims. Read more
7 Preparing for shared parental leave – New laws, which will apply where a child is due to be born or is placed for adoption on or after 5 April 2015, will enable the child’s mother to share up to 50 weeks of her statutory maternity leave with the child’s father (or the other adopting parent).
Action: Update scheme rules and member communications before 5 April 2015 to reflect this new right to shared parental leave.
8 HMRC opens door to greater VAT recovery on pension costs – HMRC has recently updated its policies on the recovery of VAT on pension costs, following two judgments of the Court of Justice of the European Union. These new policies could enable pension plan sponsors to recover more VAT on their pension costs and open the door to retrospective claims for overpaid VAT going back up to four years.
Action: Review impact of HMRC’s new policies on your ability to recover VAT on pension costs and assess merits of a retrospective claim. Read more
9 Changes to auto-enrolment requirements – Changes to the auto-enrolment legislation are expected to come into force in April 2015. These will enable employers to simplify their auto-enrolment communications and to exempt certain types of worker (such as those who have registered for protection against the lifetime allowance tax charge and those who are serving a notice period) from auto-enrolment.
Action: Review and update your auto-enrolment communications and decide how to implement new exemptions, once changes have been finalised.
10 End of DB contracting-out: Start planning now – Sponsors of contracted-out DB pension plans need to start planning now for the abolition of DB contracting-out in April 2016. This is because changes to their plan may be needed to offset the loss of their national insurance rebate and to change benefits that refer to the state pension. These changes will take time to implement and require careful planning.
Action: Affected sponsors should assess the impact of the end of DB contracting-out on their pension costs and benefits and seek advice on the options for addressing this.