AUTOMATIC ENROLMENT LEGISLATION

On 1 October 2012, the phased implementation of the automatic enrolment regime began, with the bulk of the remaining automatic enrolment legislation which was not already in force, coming into force. This includes provisions amending the stakeholder pension regime.

There is no longer a requirement to provide access to a designated stakeholder pension scheme, but where employees are already contributing to a designated stakeholder pension scheme on 1 October 2012, the employer is required to continue operating a payroll deduction facility to enable those employees to continue contributing to that scheme. The employer is not required to operate a payroll deduction facility in respect of any employees who were not contributing to the scheme via payroll deduction on 1 October 2012.

Action

Ensure that payroll deductions continue in respect of any employees contributing to a stakeholder scheme on 1 October 2012.

Action

Consider amending the employment documentation given to employees to remove any reference to access being provided to a stakeholder pension scheme.

AUTOMATIC ENROLMENT EARNINGS THRESHOLDS FOR 2013/2014

The DWP has issued a consultation on the level at which the earnings trigger and the qualifying earnings band should be set for the 2013/2014 tax year. The consultation proposes that:

  • the earnings trigger should be set at £9,205, keeping it aligned with the PAYE threshold;
  • the qualifying earnings band should be set at £5,720 to £41,450, keeping it aligned with the lower and upper earnings limits.

The consultation closed on 17 October 2012 and the final figures will be confirmed around the time of the Autumn Statement.

Action

If subject to auto-enrolment in the 2013/14 tax year, check that payroll systems are updated to reflect the revised earnings trigger and qualifying earnings band for 2013/2014 once these figures are confirmed.

REGULATOR CHECKLIST ON RECORD-KEEPING

The Pensions Regulator has published a record-keeping progress checklist and a set of FAQs on common data to help trustees achieve the Regulator’s scheme data targets by the end of the year. The Regulator also held a webinar on the topic.

Action

If they have not already done so, schemes should liaise with their administrators on what action (if any) is required to meet the Regulator’s data targets.

REGULATOR WINDING UP GUIDANCE

The Regulator has updated its winding up guidance to encourage trustees and administrators to adopt a £2 “tolerance level” when reconciling the scheme’s GMP records with those held by HMRC. For more information please see the guidance. The Regulator plans to carry out a fuller review and update of its winding up guidance in 2013.

Action

Schemes holding GMPs which are in the process of, or about to start, winding up, should consider whether to adopt the suggested £2 tolerance level.

MAINTAINING CONTRIBUTIONS TO DC SCHEMES

The Pensions Regulator has issued a consultation on changes to its codes of practice on reporting late payment of contributions to DC pension schemes (Codes of Practice 5 and 6) and new accompanying guidance.

Rather than focusing solely on reporting late payment of contributions, the revised codes of practice focus on maintaining contributions and include new sections dealing with the monitoring of contribution and the information to be provided to members.

The consultation closes on 6 December 2012. For more information, please see our client alert.

Action

No action required.

SCHEME FUNDING AND DISCOUNT RATES

The Pensions Regulator has rejected calls by the NAPF to allow schemes to lift discount rates to mitigate the impact of the current low level of gilt yields. The Regulator’s view is that the funding regime already offers schemes sufficient flexibilities to achieve affordability. In support of this view, the Regulator has recently published a report looking at how schemes have used these flexibilities in practice.

Action

No action required.

PPF LEVY 2013/2014

The PPF has published a consultation on its levy estimate for the 2013/2014 levy year. The consultation proposes to set the levy estimate at £630 million. This is a 15% increase on the 2012/2013 levy estimate but is below the maximum 25% increase which the PPF is entitled to impose.

£630 million is also the amount which the PPF expects to collect in 2012/2013. The expected actual amount collected is higher than the levy estimate largely due to a significant number of contingent assets either not being re-certified or being rejected by the PPF.

The consultation closed on 2 November 2012.

Action

No immediate action required, but schemes wishing to use a contingent asset for levy purposes should ensure that the process of obtaining and certifying that asset is started well ahead of the 31 March 2013 deadline.

PPF DIRECTED TO RECONSIDER DECISION TO REJECT CONTINGENT ASSET

The Deputy PPF Ombudsman has directed the PPF to reconsider its decision to reject a Type B(ii) contingent asset (security over real estate) on the grounds that the PPF’s guidance on the valuation of Type B(ii) contingent assets was unclear and that she was therefore unable to say that the PPF had taken all relevant and no irrelevant matters into account when making its decision.

Action

No action required.

CHANGES TO BRIDGING PENSIONS AND RPI/CPI AMENDMENTS

The DWP has published a consultation on the draft Occupational Pension Schemes (Miscellaneous Amendments No.2) Regulations 2013 which:

  • make various minor technical amendments regarding indexation requirements; and
  • introduce a power for trustees to amend scheme rules relating to bridging pensions to reflect the increase in SPA where the scheme rules would prevent such an amendment. Exercise of the power would be subject to employer consent and would require member consultation.

The consultation closed on 14 November 2012.

Action

No action required.

PROPOSED CHANGES TO CALCULATION OF RPI

The Office for National Statistics has issued a consultation on possible changes to the way in which the RPI is calculated. Some of the changes could result in the RPI moving much closer to the CPI and therefore potentially reducing scheme deficits for schemes whose increases to pensions in payment and/or revaluation of deferred pensions are calculated by reference to the RPI.

The consultation closes on 30 November 2012.

Action

No immediate action required, but schemes in which revaluation and/or increases are calculated by references to RPI should keep the progress of the consultation under review. If the way in which RPI is calculated is changed, such schemes may wish to inform members.

IORP DIRECTIVE REVIEW

The European Insurance and Occupational Pensions Authority (“EIOPA”) has launched its quantitative impact study (“QIS”) on the impact of the European Commission’s proposals for a revised IORP Directive. The QIS is expected to run until mid-December. EIOPA expects further QISs to be necessary before a revised IORP Directive can be published.

Action

No action required.

GMP EQUALISATION

Comments by Steve Webb indicate that the proposed statutory amendments requiring GMP equalisation will be going forward, but that the DWP is considering ways of minimising the burden on schemes such as looking at whether there is any way of limiting the extent to which schemes have to backdate the equalisation.

Action

No immediate action required.

REINVIGORATION OF OCCUPATIONAL PENSIONS

Steve Webb has announced that a paper on the reinvigoration of occupational pensions will be published this autumn. The paper will include more information on the concept of “defined ambition” pension schemes.

Action

No action required.