UK: Pensions Ready Reckoner - Sep 04, 2015

Last Updated: 10 September 2015
Article by Clive Weber

A recap of latest developments in the exciting world of occupational pensions.

PARLIAMENT

 

Topic

Legislation  

DC flexibility

  • Secondary annuity market

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

  • Budget 08/07/2015
  • Annual Allowance
  • Lifetime Allowance
  • Lump sums on death aged 75 or over

Never a dull moment: the July 2015 Budget announced the following changes, from tax year 2016-17:

  • Annual Allowance restricted for high earners.
  • Pension Input Periods to correspond to the tax year.
  • Death aged 75 or over: as previously indicated, lump sum death benefits on death aged 75 or over will be taxed at the recipient individual's marginal income tax rate (instead of at the special lump sum death benefits rate of 45%).  Where the death benefit recipient is not an individual e.g. a trust or company, the tax rate remains at 45%.
  • Lifetime Allowance to be reduced to £1 million, with the facility for members to opt for protection in respect of the reduction from the present £1.25 million. Apart from the Lifetime Allowance change (which will be in Finance Bill 2016) the above changes are in Finance Bill 2015. The Committee stage of the Finance Bill commences on 8 September 2015.

Tax

  • Qualifying Recognised Overseas Pension Schemes

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

  • Effective 6 April 2016
  • Impact on scheme rules
  • Lifetime allowance excess lump sums

State of play:

  • The legislation enabling employers to (within limits) alter their DB contracted-out schemes is already in force.
  • Further regulations have now been made to smooth the operation of scheme rules from 6 April 2016 when the single-tier state pension applies.
  • Disappointingly, there is no change to the existing requirement that contracted-out rights accrued since 6 April 1997 cannot be reduced where a member with benefits in excess of the Lifetime Allowance wishes to access them by taking a lump sum.

Short service refunds from DC schemes

  • Abolition from 1 October 2015

 

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.

 

Data Protection

  • EU reforms

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.

 

Guaranteed Minimum Pensions

  • Sex equalisation

 

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

  • End of five-year transitional period

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!

 

Possible future legislation

  • Section 75 debts
  • Easing transfers
  • Revamp of pension taxation

Government consultations of particular interest:

  • DWP's consultation regarding possible Section 75 easements (debts in multi-employer schemes for non-associated employers) – consultation closed on 22/05/2015, upshot awaited.
  • Treasury consultation on pension transfers and exit charges – possible further legislation to ensure DC flexibilities are working properly. Consultation closes on 21 October 2015.
  • Treasury consultation on strengthening the incentive to save (aka removal of pensions tax relief) – interpreted by some as the Chancellor's bright idea to raise billions of pounds by restricting tax relief on pension contributions and instead conferring exemption on the emerging pension: cashflow windfall for the Treasury, or are we being too cynical?! The consultation opened on 8 July and closes on 30 September 2015. The Government will then decide what action to take, if any.  Please see the separate article elsewhere in this Bulletin.

 

FROM THE COURTS

 

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.

 

Duty of good faith

IBM v Dalgleish

(June 2015)

 

 

The High Court has given IBM permission to appeal its decisions

  • that IBM was in breach of its duty of good faith in altering the terms of its scheme and subsequently closing it to future accrual
  • regarding remedies for the breaches

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.

      

Other appeals pending  

There are numerous appeals due to be heard in the Court of Appeal later this year or in 2016. These include:

  • Briggs v Gleeds (valid execution of amending deeds)
  • MF Global Services (validity of indemnity for section 75 debts in corporate group)
  • Horton v Henry (whether the Court can force a bankrupt individual to exercise options under his pension policy so that the sums form part of the bankrupt's estate and are payable to creditors). This case clearly has important implications in the light of the new DC flexibilities!

 

PENSIONS OMBUDSMAN

 

  • Numerous recent pension liberation decisions including those in Johnston, where the member had a statutory right to transfer (the Ombudsman holding that the trustees making the transfer were not at fault) and Hughes, where there was no statutory transfer right (and the Ombudsman upheld the trustees' refusal to make the transfer).
  • The PO has also ruled that, on complaints about retirement benefits, the scheme administrator was not yet bound to address GMP sex inequalities in the absence of legislation requiring them to do so.

 

PENSIONS REGULATOR

 

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

 

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

 

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.