This article summarises the most important developments anticipated or already in force in UK pensions in 2019.
By: Georgina Beechinor
Firm: Sacker & Partners LLP
While much remains uncertain at the time of writing, the UK Pensions Regulator issued a statement for pension scheme trustees in January 2019, noting that it does not expect Brexit to have a significant effect on the basis on which workplace pension schemes operate, or on trustees’ ability to continue administering their schemes effectively.
A ban on cold calling
Also in January 2019, legislation brought into force a ban on ‘cold calling’. As a result, UK firms are now restricted from making unsolicited direct marketing calls to individuals regarding pension schemes (subject to limited exceptions).
The Pensions Directive (‘IORP II’)
Regulations are now in force which pave the way for new pensions governance measures originating from ‘IORP II’. As a result, the Pensions Regulator will update various of its codes of practice (the Regulator’s codes provide practical guidance for those running workplace pension schemes on how to comply with the legal requirements of pensions regulation). The revised codes are expected to come into force later this year.
Automatic enrolment: mandatory contribution increases
For defined contribution pension schemes that are used to meet an employer’s automatic enrolment requirements, both minimum employer and overall contribution rates are set to rise from 6 April 2019. This is the second successive annual increase in minimum contributions, and the last one currently scheduled to take place under legislation. The actual percentage increase that will apply in a particular scheme will depend upon the elements of income that are pensionable.
Automatic enrolment: thresholds for 2019/20
The thresholds for automatic enrolment pension saving for the tax year 2019/20 have been confirmed as follows:
- The earnings trigger (for establishing eligibility for pension saving) will remain at GBP 10,000 (it has been at this level since the tax year 2014/15).
- The qualifying earnings band (used for calculating contributions to defined contribution pension arrangements under the statutory default mechanism) will continue to be aligned with National Insurance contribution rates, i.e. GBP 6,136 for the lower level of qualifying earnings and GBP 50,000 for the upper limit.
Pooled funds: new disclosure obligations
New measures on the disclosure of information on a pension scheme’s pooled funds come into force from 6 April 2019, as part of the Government’s drive to improve the transparency of costs, charges and investments in defined contribution pension schemes.
Trustees must inform members, in their annual benefit statement, that information about the funds in which they are directly invested is available on request. Members will be limited to one request every six months.
On making a request, a member must be provided with specified information corresponding to the investment options in which the member was invested at the time of his or her request or, if there has been no change to the member’s investment options, on another date from up to six months earlier. This means that, for the most part, trustees will be permitted to update pooled fund information on a six-month cycle.
Tax relief on life insurance premiums and contributions to QROPS
The Finance Act 2019 contains provisions broadening an exemption that gives tax relief on employer premiums paid into life assurance policies to allow named beneficiaries to be any individual or a registered charity. Currently, premiums only attract tax relief if the named beneficiary is an employee or a member of their family or household. The provisions also apply to contributions to qualifying recognised overseas pension schemes (‘QROPS’). The legislation takes effect from 6 April 2019.
‘Modernisation’ of tax exemptions
Since 9 March 2017, a 25% overseas transfer charge is deductible from transfers of UK pension savings to QROPS, except in set circumstances. Her Majesty’s Revenue & Customs has issued two sets of draft regulations relating to the charge for technical consultation to which its response is awaited.
The first deals with the conditions and the process for claiming a repayment of the overseas transfer charge, where the charge was either paid in error or a change in the individual’s circumstances now means that the original transfer was exempt from the charge.
The second seeks to align the existing information requirements with those detailed in the draft Repayment of Overseas Transfer Charge regulations, by clarifying the information now required under the repayment claims process.
The regulations are due in force on 24 April 2019.
New legislation for occupational pensions
The UK’s Minister for pensions and financial inclusion, Guy Opperman, has signalled his intention to deliver (during 2019) a wide-ranging Pensions Bill on collective defined contribution pension, pensions dashboards (designed to enable people to see details of all of their pension savings in one place including workplace, private and state pensions), and defined benefit ‘superfunds’ (vehicles for consolidating defined benefit pension arrangements), among other things.