A recap of latest developments in the exciting world of occupational pensions.
PARLIAMENT |
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Legislation |
DC flexibility
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In his Budget on 8 July 2015 (covered in a separate article elsewhere in this Bulletin) the Chancellor announced that the Government will legislate for a secondary annuity market, to help individuals already with annuities who cannot access the April 2015 flexibilities. To ensure annuitants are adequately informed and protected, the start date for the new secondary annuities market will be April 2017 instead of April 2016. WB comment: the regulatory and tax changes needed are substantial and therefore the postponement is understandable. Finance Bill 2016 will contain the tax changes. Notably absent from the Budget was any sign that members of DB schemes are to be entitled to directly access the cash value of their DB benefits. |
Tax
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Never a dull moment: the July 2015 Budget announced the following changes, from tax year 2016-17:
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Tax
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HMRC have reviewed the operation of Section 169 of the Finance Act 2004 under which transfers from UK registered pension schemes to overseas pension schemes are, in the case of qualifying overseas schemes, authorised transfers. Trustees considering making such transfers should now ensure they first take legal advice as HMRC has narrowed the list of permissible arrangements and, in effect, put the burden on transferring trustees to verify whether the recipient overseas scheme meets HMRC's requirements, particularly that benefits cannot (save in ill-health) be accessed prior to age 55. (Notably, some overseas schemes permit early access in other circumstances e.g. financial hardship.) Please see the separate article elsewhere in this Bulletin. |
End of DB contracting-out
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State of play:
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Short service refunds from DC schemes
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Reminder – the legislation changes from 1 October 2015 so that new DC members with short service will usually have to receive full scheme benefits instead of refunds of contributions. DC schemes should review their scheme rules and specialist legal advice should be sought.
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Data Protection
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The European General Data Protection Regulation, having direct effect in EU Member States, is expected to be finalised this year and take effect in 2017. Not only are data protection requirements tightened but fines for non-compliance are greatly increased (penalties of up to 5% of worldwide annual turnover). Please see the separate article elsewhere in this Bulletin.
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Guaranteed Minimum Pensions
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Government still intends to legislate. (Now it is back in power it cannot duck this one!) Timing remains uncertain. |
Refunds of scheme surplus to employers
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Reminder – the transitional period ends on 6 April 2016 for trustee "section 251" resolutions to enable schemes to repay surplus. Please contact us if you are unsure whether your scheme has completed a Section 251 Resolution. One should never rule out the possibility of a surplus: the "problem" prior to the year 2000 was often surplus, not deficit!
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Possible future legislation
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Government consultations of particular interest:
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FROM THE COURTS |
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Topic |
Developments |
Investment advice Trustees of the Rex Procter Scheme v Scottish Widows (June 2015) |
In this interesting decision the Scottish court decided that the trustees' investment contract with Scottish Widows was governed by English law and that the trustees' claim against Scottish Windows for allegedly negligent advice regarding an investment contract switch was time barred. The claim had been lodged more than 6 years after the investment contract switch and more than 3 years after the alleged loss had bene discovered – the law does not permit the making of 'old' claims beyond a certain point.
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Duty of good faith IBM v Dalgleish (June 2015)
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The High Court has given IBM permission to appeal its decisions
WB comment: this long-running case looks set for the Court of Appeal next year. Adjustments to members' benefits can be successfully made without breaching the duty of good faith provided appropriate steps are taken – see, for instance, Bradbury v BBC where the High Court upheld the capping of salary increases for pension purposes (covered in our June 2015 Bulletin). |
Survivor benefits Innospec v Walker (June 2015) |
The Court of Appeal were due to decide whether only limited or full survivor pension rights have to be granted to registered civil partners. Decision awaited.
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Other appeals pending |
There are numerous appeals due to be heard in the Court of Appeal later this year or in 2016. These include:
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PENSIONS OMBUDSMAN |
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PENSIONS REGULATOR |
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Assessing and monitoring the employer covenant |
TPR published on 13 August 2015 its practical guide to the assessing and monitoring of the employer covenant. TPR's Chief Executive urges trustees "to use this important guide to assess and monitor their employer covenant in a way that is proportionate to the circumstances of the scheme and the need for an employer to grow". Please also see the separate article elsewhere in this Bulletin. |
PENSION PROTECTION FUND |
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Pre-pack administrations |
Concerns about certain pre-pack administrations (where pension liabilities might, in effect, be dumped on the PPF) continue. The PPF's further guidance indicates that in certain circumstances it will enquire about the level of consultation by the insolvency practitioner with the scheme trustees. |
OTHER DEVELOPMENTS |
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UK Statistics Authority |
In June 2015 the UK Statistics Authority opened its consultation on price indices, following the independent expert's January 2015 report. The consultation closes on 15 September 2015 and the Authority is expected to make its final decisions later this year. |
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.