Green Paper published on the future of defined benefit schemes
On 20 February, the Government published its much anticipated Green Paper on the funding and regulation of defined benefit ("DB") pension schemes.
The Green Paper invites trustees, members, industry professionals and sponsoring employers to provide their views on a broad range of topics relating to DB schemes. The deadline for responses to the consultation is 14 May 2017.
We will be providing commentary on the Green Paper, which can be viewed here1.
Regulator gets Green light on £363m deal over BHS pension schemes
The Pensions Regulator has announced that it has reached a settlement with Sir Philip Green to help secure the pensions of 19,000 members of two BHS pension schemes, following the collapse of the high street retailer.
The deal, worth £363m, includes the creation of an independent pension scheme funded by the majority of the settlement amount and to which members of the current BHS schemes can transfer. If they do, they will receive the same starting benefits to which they were entitled in the BHS pension schemes (at a higher level than that available from the Pension Protection Fund), with an annual increase rate for pre- April 1997 benefits of 1.8%. Alternatively, members can opt for a lump sum payment (if the value of their pension pot is £18,000 or less) or remain in their current scheme and receive their benefits from the PPF.
The Regulator's announcement regarding the settlement is available here2.
Regulator suggests ban on SSAS transfers
The Pensions Regulator's Executive Director for Regulatory Policy, Andrew Warwick- Thompson, has published a blog3 in which he calls for a ban on transfers into Small Self-Administered Schemes ("SSASs"). In his view, the ban is needed in light of the less stringent reporting and other regulatory requirements that apply to SSASs, when compared to authorised master trusts and FCA-regulated products such as Self- Invested Personal Pensions.
The blog also proposes an outright ban on the establishment of further SSAS arrangements. We will be keeping a close eye on any developments stemming from those comments.
Regulator makes DC Chairs uncomfortable
The Pensions Regulator cannot be accused of 'sitting around' on DC governance, after it issued fines against master trusts which failed to produce a Chair's statement within the statutory timeframe of seven months from the scheme year end date. The maximum fine of £2,000 was imposed on one professional trustee company, and a further penalty of £3,020.70 was given to the trustee of three Save & Prosper funds, after it notified The Regulator regarding the breach in relation to each fund.
Lifetime ISAs legislation now in force
Lifetime ISAs ("LISAs") will be available from 6 April 2017, with the primary legislation governing them having come into force: the Savings (Government Contributions) Act 2017.
The supporting regulations have been published in draft form, and set out much of the detail regarding how LISAs will work (e.g. the government bonus conditions).
LISAs are intended to help younger people save flexibly for the long-term, throughout their lives. Their purpose is to help them to simultaneously save for a first home and for their retirement, without having to choose one over the other.
As expected, LISAs will attract a 25% tax-free Government bonus on savers' contributions. Contributions of up to £4,000 per year are allowed, and can benefit from an annual bonus of up to £1,000.
Savers need to be aged over 18 and under 40 in order to open a LISA, and can make contributions and receive the government bonus up to age 50. From age 60 (or earlier if the account holder is terminally ill), the funds can be withdrawn for any purpose, including as a pension, and withdrawals (including the government bonus and any investment returns) are tax-free. The most significant flexibility is that the fund can be used towards the saver's first home (up to the value of £450,000).
It remains to be seen whether the introduction of LISAs will increase the provision being made for retirement, or whether it will have a detrimental impact on more traditional pension savings with people primarily using LISAs to get a foot on the property ladder.
Tata steelworkers back pension reform
Tata Steel employees, represented by three trade unions, have voted in favour of a deal designed to ensure the sustainability of the British Steel Pension Scheme ("BSPS"). The agreement will see the closure of the BSPS – a final salary scheme – to future accrual, and includes an offer for members to join a money purchase scheme with a 10% employer contribution instead. As an addon, it is understood that BSPS members over the age of 50 who plan to retire early may receive an additional pension contribution of up to £10,000.
The agreement will guarantee the retention of 4,000 jobs at Tata's Port Talbot site for five years and could result in the BSPS not having to apply for admission to the Pension Protection Fund.
2 http://www.thepensionsregulator.gov.uk/press/pn17-07.aspx
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- Pensions Ombudsman Update
- The View from the Courts
- Legislation Update
- PPF Levy Update
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
