VAT on pension scheme services: transitional period extended

On 26 October 2015 HMRC issued a further brief on the issue of VAT on pension scheme services. The transitional period during which existing practice in relation to VAT on pension scheme services can be maintained has been extended to 31 December 2016. For more detail, see our e-bulletin.

Consultation on new risk warning requirement and other changes

The Government is consulting  on a new statutory requirement for schemes to send members with money purchase benefits a risk warning which explains the various potential benefit options (ie transfer value, annuity purchase, lump sum or drawdown), whether those options are available under the scheme, and factors in respect of those options which could adversely affect retirement income.  The Government says it expects the risk warnings to be provided alongside current communications, after the "wake up pack" but before the member accesses his benefits.  The warnings will also need to be accompanied by a statement setting out the member's options under the scheme and flagging the importance of the risk warnings and of accessing pensions guidance or advice.

Other points covered by the consultation include: applying to ex-spouses' rights the existing independent advice requirements before making a defined benefit to money purchase transfer; a call for evidence on how benefits with a guaranteed annuity rate should be valued when determining whether their value is over £30,000; and amendments to ensure that schemes are still eligible for the PPF where appropriate notwithstanding that the nature of the employer makes it legally incapable of undergoing a triggering insolvency event.

The consultation closes on 11 January 2016.

Government consults on changing scheme accounts requirements and multi-employer schemes definition

As part of a consultation  on various regulatory requirements relating to pension schemes, the Government is proposing significant changes to the information that needs to be reported in scheme accounts.  The Government is proposing to delete most of the investment disclosure requirements set out in the current regulations. The auditor's statement will be required to confirm whether the accounts have been prepared in accordance with current reporting standards and to provide information relating to concentration of risk, employer-related investments and total of investment purchases and sales.  It is proposed that the changes will come into force on 1 April 2016.

Other areas covered in the consultation include a change designed to ensure that a scheme does not become subject to the trustee requirements applicable to multi-employer schemes for non-connected employers simply by reason of not every employer being a group company. Under the revised definition, a scheme will only be subject to the requirements if it has been promoted to employers as a scheme where participating employers need not be connected.  In addition, the definition of "connected" is being broadened so (a) two employers who form a joint venture will be connected with each other and (generally) with the joint venture company even if they are not in the same group; and (b) "connected" status does not cease a result of a company leaving a group or a joint venture terminating.  The changes will take effect from 6 April 2016.

The consultation closes on 9 December 2015.

Pensions Regulator consults on new DC code of practice

On 24 November the Pensions Regulator published for consultation a new code of practice on governance and administration of occupational defined contribution schemes.  The code will replace the existing code (number 13) published in 2013.  The need for a new code has been prompted by the introduction of new charging and governance requirements (covered in our December 2014 update).  The proposed new code is significantly shorter than the current one, and the Regulator has altered some of the terminology in the code to make clear when it is referencing a statutory requirement and when it is setting a standard that it expects all relevant schemes to meet.  The Regulator intends to publish related guidance in separate documents.

The consultation closes on 29 January 2016.

For more information, click here.

30 day vesting period now applies to money purchase benefits

A member will acquire a right to vested benefits after 30 days (instead of 2 years) if his pensionable service starts on or after 1 October 2015 and all his benefits are money purchase. If scheme rules do not comply with this requirement, the relevant legislation does not override the rules but provides that trustees should "take such steps as are open to them" to alter the rules so that they comply with the 30 day vesting requirement. Trustees who have not already done so should urgently consider whether changes to their scheme rules are necessary to comply with the legislation.

EU Court safe harbor ruling may affect data transfer by UK pension schemes

A ground-breaking ruling by the Court of Justice of the European Union may have implications for UK pension schemes which allow their data to be transferred to the US.  The Court ruled invalid a European Commission decision on the "safe harbor" regime which many businesses had relied on as allowing them to transfer data from the EU to the US.  For more detail, see our e-bulletin.

PPF publishes draft levy estimate for 2016/17

The PPF has published its draft levy estimate and related draft documentation for 2016/17.  The documentation does not indicate any major changes in policy.  However, some points worth noting are the PPF's intention to re-invoice schemes which have wrongly identified themselves as "last man standing", the PPF's approach to asset-backed contributions which have already been certified, the PPF's approach to "excluded mortgages" which have already been certified and additional detail on the PPF's approach to guarantees that are certified as contingent assets.  For more detail, click here.

Last chance to give notice of "section 251 resolution" to preserve surplus payment powers

The deadline by which trustees must give notice to members of their intention to pass a "section 251 resolution" is 5 January 2016. Such a resolution may be required if the trustees wish in future to make use of a power to pay surplus from a scheme to the employer. The requirement for a section 251 resolution was introduced in connection with the "A-day" changes to the pensions tax regime that took effect from 6 April 2006. The deadline for passing a section 251 resolution is 5 April 2016. However, as three months' notice must be given to members, the deadline for giving notice is 5 January 2016. Many trustee boards will already have considered this issue and either passed a resolution or concluded that this is not necessary, but trustees who have not yet done so should consider this issue as a matter or urgency.

Government consults on regulations related to end of contracting-out

The Government has consulted on further draft regulations relating to the end of contracting-out on 6 April 2016. Much of the draft legislation simply deals with consequential changes to the wording of existing legislation, but the draft regulations do set out the proposed revised wording for the legislation governing transfers between schemes. Under the current law, it is possible in some circumstances to transfer a member's accrued rights from one contracted-out scheme to another without his consent. After the abolition of contracting-out, it will remain possible in some circumstances to make a transfer without consent between two formerly contracted-out schemes. However, a transfer without consent from a formerly contracted-out defined benefit scheme to a scheme established on or after 6 April 2016 will not be possible.

Pensions Ombudsman upholds member complaint, allowing retrospective application for ill-health retirement from active status (Ms B)

A recent Pensions Ombudsman decision upholding a member complaint in an ill-health early retirement case shows that a member may be able to apply retrospectively for ill-health early retirement from active status some considerable time after his/her active membership has ceased.  The case also indicates that in ill-health cases the Ombudsman may be sympathetic to requests to exercise his discretion to consider complaints outside the usual three year time limit.  For more information, click here.

Pensions Ombudsman sets out approach to ill-health retirement where treatments not exhausted and conflicting medical evidence (Hussain)

The Deputy Pensions Ombudsman has upheld a complaint relating to an ill-health early retirement application in relation to the Local Government Pension Scheme. The complaint raised a number of issues, but two key points were: (a) the employer's approach where it believed the member had not yet exhausted all available treatments; and (b) the employer's approach to conflicting medical evidence. For more information, click here.

Consultation on banning member-borne commission payments in occupational pension schemes

The Government has consulted on how it should achieve a ban on member-borne commission payments in occupational pension schemes providing money purchase benefits (including money purchase AVCs) that are used to satisfy an employer's auto-enrolment duties.  For more information, click here.  

Autumn Statement - Auto-enrolment contribution increases delayed

In his Autumn Statement on 25 November the Chancellor announced that the increases to minimum contribution levels for auto-enrolment schemes, which had been due to take effect from October 2017 and October 2018, will each be delayed until the following April to align with the tax year. Trustees of schemes to which the employer makes contributions at the legal minimum for auto-enrolment should ensure they understand whether their scheme rules are worded to "follow" the minimum contribution rates set out in legislation, or whether the rules may potentially now have the effect of requiring contributions above the legal minimum from 1 October 2017. They should also consider whether changes to member communications will be necessary as a result of the delay.

No major changes to the pensions tax regime were announced at the Autumn Statement. The Chancellor confirmed that the Government will publish its response to its consultation on pensions tax relief at Budget 2016. For more detail on pensions-related announcements in the Autumn Statement, see our e-bulletin.

Case study illustrates Regulator's approach to intervening in funding disputes

A rare case study published by the Pensions Regulator illustrates how and when it may intervene if a scheme's employer and trustees are unable to agree a schedule of contributions. The case study, which relates to the Docklands Light Railway pension scheme, shows that the Regulator is willing to exercise its statutory intervention powers, but sees this very much as a last resort, particularly where it believes scheme rules give trustees power to impose a contribution rate. The case involved a franchisee, and so is of particular note for schemes with employers that are franchisees with a fixed term franchise. For more detail, see our blog.

Court of Appeal upholds exemption allowing pre-5 December 2005 benefits to be restricted to male/female married couples

In its decision in Walker v Innospec the Court of Appeal has upheld the validity of a provision in the Equality Act 2010 which allows survivor benefits accrued before 5 December 2005 (the date of the introduction of same sex civil partnerships) to be restricted to widows/widowers in a male/female marriage, i.e. not provided for the survivor in a same sex marriage or civil partnership.

"Pot follows member" abandoned

In a statement on 15 October 2015 the Government announced that it no longer plans to implement "pot follows member" under which pension pots below a specified value would have been automatically transferred to a member's new workplace pension scheme.