1. AUTOMATIC ENROLMENT
The Pensions Regulator is advising employers to identify the date on which automatic enrolment duties will first apply to them – this depends on payroll size, with larger employers affected from October 2012. Workforce assessments should be planned and these will not always be straightforward. A project team should be identified to manage auto-enrolment duties. Do not underestimate the complexities!
2. RPI/CPI – UPDATE
The consultation response effectively confirms that the “scheme rules lottery” will continue. Pension plan rules that explicitly provide for RPI increases will not benefit from overriding legislation that would provide an automatic change to CPI. However, the Government is considering dispensing with the requirement for a statutory underpin for plans that revalue deferred pensions in line with RPI.
3. PUBLIC SECTOR ANNOUNCEMENT
The announcement by Danny Alexander (Treasury Chief Secretary) of the intention to move to a CARE basis for public sector pensions was met with predictable outrage by affected workers and unions. A switch to CARE and an increase in Normal Pension Age are planned but key issues such as future accrual rates are yet to be confirmed. Is a summer of discontent ahead?
4. ABOLITION OF PROTECTED RIGHTS
With less than a year to go until the abolition of Protected Rights, employers and trustees with DC contracted-out plans should be discussing the implications and any resulting changes to scheme design. Trustees should also be considering how and when they will communicate the change to members (which can be done in advance).
5. NEW PPF FORMULA
The PPF has confirmed new levy parameters which will be fixed for 3 years from April 2012. This should provide more certainty for levy payers. Employers need to keep track of their D&B score on a monthly basis as the effects of moving to a lower insolvency band could be severe. Investment risk will be incorporated into the levy calculation for the first time.
6. BRIBERY ACT 2010
The Act came into force on 1 July 2011 and transforms the UK’s anti-corruption framework. Trustees are already bound by strict fiduciary duties and the risk of bribery offences might be perceived as ‘low’. However, to help prevent and defend allegations of bribery, trustees are advised to ensure transparency in contract negotiations and to update conflicts of interest policies.
7. US TAX AVOIDANCE LAW
US citizens are subject to US taxation on their worldwide income and assets. In order to prevent tax evasion the US Government will, from 2013, impose a 30% withholding tax on payments made by US bodies to overseas entities unless the receiving party agrees to strict compliance and disclosure measures. If legislation (or regulation) does not provide an exemption for UK pension plans this will pose major issues.
8. PATERNITY LEAVE
Legislation extending paternity leave rights is now in force. There are two distinct categories of paternity leave – ordinary paternity leave and additional paternity leave (of up to 6 months). Some pension plan rules will provide more generous benefits than legislation requires because they were not drafted with this distinction in mind. Employers should ensure that plan rules reflect their paternity leave policy.
9. DEFAULT FUNDS
The DWP has published good practice guidance for the operation of default funds in trust and contract based DC arrangements. The guidance covers a range of issues including assessing the suitability of the default option; investment performance management; and member communications. Trustees should consider whether their current governance processes are sufficient.
Changes to the pensions accounting standard will take effect from 1 January 2013. Employers will be required to calculate the expected return on pension fund assets by reference to the return on AA corporate bonds. This may have a significant impact on the reported profits of UK companies and could influence