DWP announces publication of consultation papers
The Department for Work and Pensions has announced the publication of two separate consultation papers as part of its ongoing Simplification Plan. The first of the two documents is an independent review of pensions institutions, headed by Paul Thornton, which looks at how effectively the Pensions Regulator, the Pension Protection Fund and the Financial Services Authority interact and how well they work in support of current Government policy and reform proposals on pension issues. The review also covers TPAS, the Pensions Ombudsman, the PPF Ombudsman and other bodies but generally excludes the Financial Assistance Scheme.
Consultation closes on 31 March 2007. To view the consultation paper and to find out more about the independent review visit: http://www.dwp.gov.uk/pensionsreform/institutional_review.asp. The second consultation paper is a Deregulatory Review of Private Pensions, which is being headed by Chris Lewin (former head of UK pensions at Unilever) and Ed Sweeney (joint deputy general secretary of Amicus). The objective of the review is to simplify and reduced the burden of legislation governing private pensions whilst maintaining a balance between member protection and encouraging employer provision of pensions. Messrs Lewin and Sweeney are working jointly with the DWP Deregulation Advisory Group, which consists of representatives from the pensions industry, business and trades unions. The deadline for responses to the consultation document is 6 April. To read more about the deregulatory review and to download a copy of the consultation document go to: http://www.dwp.gov.uk/pensionsreform/deregulatory_review.asp.
Both reviews are working to similar timelines and those leading the reviews will report their findings and recommendations to Ministers later in the spring.
The DWP’s Simplification Plan 2006 – 2007 is available on the DWP website at:
Government appeals Pensions Action Group (PAG) High Court ruling
The Government has launched an appeal against last month’s PAG judicial review victory. Last month, a High Court judge ruled that work and pensions secretary John Hutton had acted unlawfully when he rejected the Parliamentary Ombudsman’s report into failed occupational pension schemes.
The judge ruled that the Government had misled the public when it published information assuring people their occupational pension schemes were safe, but he did give leave to appeal the decision. A DWP spokesperson who confirmed the appeal stated, “We have appealed the finding of maladministration because the judgement raises important constitutional issues which need to be resolved”. However, the spokesperson did say that the appeal would not prevent the Government from considering the ombudsman’s recommendation with regard to compensation.
In his 11th Budget, Chancellor Gordon Brown has extended the Financial Assistance Scheme’s funding from £2 billion to £8 billion. The Chancellor says that the scheme – which was set up to help 125,000 people who lost their pensions because of company insolvency – will now give all the affected workers some help. Responses to the announcement have been mixed.
Community and Amicus trade unions have called the measure “a major step towards achieving pensions justice”, but the Liberal Democrats have said the announcement is “just more halfmeasures” and it was reported in the press that Pensions Action Group campaigner Ros Altmann called the extension “a classic example of the Government fiddling figures”.
The Chancellor also announced that the basic rate of income tax will be reduced from 22% to 20% from April 2008. This move has prompted speculation that the value of pension savings for around 22 million could be reduced, because pension contributions attract upfront tax relief. This will decrease the size of the gross pension contribution for a basic rate taxpayer who contributes £100 from £128.21 to £125 and to maintain the same level of pension saving, investors will need to increase their own contributions by 2.5%.
The 2007 Budget summary, notes and related information are available at:
Stakeholder pensions employer pack updated
The Pensions Regulator has updated its guidance for employers on offering stakeholder pension schemes to their employees. The updated pack includes information about employer responsibilities under a scheme, details of how to set up a workplace stakeholder scheme, together with sample consultation and information letters for an employer to send to employees in advance of setting up a stakeholder scheme.
The latest from the PPF
Following the recent consultation on its 2007/08 pension protection levy estimate, the PPF has now considered all of the responses and published the final version of the 2007/08 Levy Determination. The Determination sets out the rules for calculation of the 2007/08 pension protection levy which will apply in the case of every eligible scheme. It has also published its summary of responses to the recent consultation.
The response document is available at: http://www.pensionprotectionfund.org.uk/summary_responsesmar2007.pdf and the final version of the 2007/08 Levy Determination is available at: http://www.pensionprotectionfund.org.uk/levy_determination_0708.pdf.
The PPF has also recently issued a reminder that the deadline for submitting voluntary certificates in respect of the 2007/08 pension protection levy is 5pm on 30 March 2007 for Section 179 Valuation Certificates and Contingent Asset Certificates, and 5pm on 5 April 2007 for Actuarial Certificates of Deficit Reduction Contributions. The PPF reminder can be downloaded at www.pensionprotectionfund.org.uk/news-details.htm?id=5769.
Latest publications from HMRC
HMRC has published a factsheet for Scheme Administrators. For most schemes, the Scheme Administrator will be the scheme trustees, and the factsheet summarises the various duties and responsibilities which they must undertake in that capacity. The factsheet is available to download at http://www.hmrc.gov.uk/pensionschemes/scheme-administrator-facts.pdf.
HMRC has also published revised versions of various maintenance forms on its website, including form APSS151 (to add a Scheme Administrator), APSS 152 (to amend scheme details), APSS 153 (change of Scheme Administrator/Practitioner user details), APSS154 (associate Scheme Administrator to scheme) and APSS160 (cessation of Scheme Administrator).
To access the forms please visit: http://www.hmrc.gov.uk/pensionschemes/maintenance.htm .
HMRC publishes Tax Simplification Newsletter No. 25
HMRC has published the latest in its series of tax simplification newsletters. Included in the newsletter is an item that seeks to clarify the position regarding the operation of the lifetime allowance test under Benefit Crystallisation Test 3 (where a pension starts to be paid at a higher rate than previously) on scheme pensions which started before A-day. HMRC is currently consulting on this issue, and during that consultation exercise, HMRC received a number of requests for clarification on how it will interpret the existing provisions. This part of the Newsletter attempts to address these concerns. In addition, the Newsletter advises that: the notional earnings cap for tax year 2007/08 will be £112,800; it will be issuing self assessment tax returns (SA970) in April to pension scheme trustees if there has previously been any tax liability or a repayment has been claimed; with effect from 6 April 2006 statememt of practice 13/91 ‘Ex gratia payments made on termination of an office or employment due to retirement or death’ was withdrawn; and it contains a link to HMRC’s recently published guidance on the tax treatment of payments made in genuine error to or from a registered pension scheme.
To view the newsletter in full visit: http://www.hmrc.gov.uk/pensionschemes/newsletter25.htm .