In time-honoured tradition in the pensions environment, a number of changes are going to take effect on or around 6 April. It is important that pension scheme trustees and employers are aware of and, where relevant, meet certain deadlines, in order to avoid falling foul of legal requirements.
Upcoming changes and key deadlines are:
Annual Allowance and Lifetime Allowance
From 6 April 2014, the standard lifetime allowance will be reduced from £1.5 million to £1.25 million. Individuals must apply for “fixed protection 2014”, and the application must be received by HMRC, before 6 April 2014 in order to retain a lifetime allowance of £1.5 million.
“Individual protection 2014” will also be available, and will give individuals who have pension savings of more than £1.25 million a lifetime allowance of the amount of pensions savings they had on 5 April 2014 (subject to an overall maximum of £1.5 million). Applications for “individual protection 2014” can be made from when the relevant legislation comes into force (expected to be August 2014) and must be received by HMRC by 5 April 2017.
If you have not already communicated with your members about the importance of notifying the scheme trustees if those members have any intention to apply for fixed or individual protection, you should do so very soon.
Any payments of annual allowance charges made by a pension scheme for liabilities relating to the 2011/12 tax year must be accounted for in an accounting for tax (“AFT”) return by the quarter ending on 31 March 2014, and the return must be delivered and the tax paid by 15 May 2014.
Disclosure of information
Changes to the statutory disclosure requirements come into force on 6 April 2014. The changes include:
- a new requirement that trustees of defined contribution schemes which follow a lifestyling strategy must inform members about lifestyling
- the option for statutory money purchase illustrations to be made more personalised
- clarification of the requirements relating to the disclosure of information to members by electronic means and
- simplifying and streamlining basic scheme information requirements.
Administration systems should be updated to recognise the new requirements and ensure that in due course compliant announcements are issued to members.
Money purchase benefits definition
The new definition of money purchase benefits contained in the Pensions Act 2011 is expected to come into force on 6 April 2014. The new definition will be backdated to 1 January 1997, but transitional provisions (also proposed to come into force on 6 April 2014) will apply in certain cases to minimise the impact of backdating on pension schemes. These transitional provisions have been the subject of a recent consultation exercise and we currently await the Government’s response to that consultation.
We understand that more responses to the consultation were made than expected. We suspect that this could result in a delay to the 6 April 2014 implementation date for the changes, but so far we have not heard anything from the DWP which alters the current timetable.
When the new definition of money purchase benefits comes into force, the change is likely to have a significant impact on schemes providing benefits which fall within the new definition. Some of the changes will require the trustees of the scheme to take immediate action and some changes will not require the trustees to take action until the next valuation of the scheme, or if an employer fails or withdraws from the scheme.
Automatic enrolment earnings thresholds
With effect from 6 April 2014, the earnings trigger used to decide whether an individual should be automatically enrolled will rise to £10,000 (from the current level of £9,440). The band of qualifying earnings on which minimum contributions under legislation must be based is also being increased to between £5,772 and £41,865 (currently qualifying earnings are between £5,668 and £41,450).
Employers should continue to use existing figures up to and including 5 April 2014, but will need to ensure that payroll systems are revised to factor in the new figures from 6 April 2014.
PPF levy certification
Contingent assets to be taken into account for the purposes of reducing an employer’s 2014/15 PPF levy must be certified or re-certified (as appropriate) by 5pm on 31 March 2014. Deficit-reduction contributions must be certified by 5pm on 30 April 2014.