UK: What's Happening In Pensions - October 2017

Last Updated: 6 November 2017
Article by Travers Smith LLP

IN THIS ISSUE:

  • Pension protection levy: The PPF has published a joint policy statement and consultation on the draft 2018/19 pension protection levy determination and associated documents. It is also consulting on new standard form contingent asset agreements. Existing contingent asset agreements, for example guarantees or charges, do not need to be amended in order to be recognised for the PPF levy year 2018/19 but may need to be amended in order to be recognised for the PPF levy year 2019/20 and thereafter.
  • VAT on insurers' investment fees: HMRC has announced that from 1 January 2018 it is discontinuing its policy of allowing insurers to treat their supplies of certain pension fund management services (supplies to schemes that are not SIFs) as VAT exempt insurance. This is expected to affect some DB pension schemes.
  • Anti-money laundering regulations: HMRC is requiring trusts (including pension schemes) that first became liable to pay income tax on their own account and/or capital gains tax in 2016/17, and are not already registered for self-assessment, to register with them by 5 December 2017 under the new anti-money laundering regulations. New record-keeping requirements under the regulations also apply to all trust-based pension schemes.
  • Retrospective equalisation amendments: The Court of Appeal is asking the European Court to rule definitively on whether EU law prohibits a scheme from equalising pension ages by levelling down benefits (ie, to age 65 for men and women) in respect of service before the date of the amending deed, in circumstances where the retrospective amendments would otherwise be valid under the rules of the scheme and UK law.
  • RPI and CPI: BT and the BT Pension Scheme trustees have made an application to the High Court in relation to a possible switch from RPI to CPI as the basis for pension increases. The Court is asked to consider whether the language of the scheme's indexation rules allows such a switch.
  • Lifetime allowance: HMRC has announced the launch of its lifetime allowance look-up service for scheme administrators.
  • TPR/FCA guide for employers and trustees: The Pensions Regulator and FCA have jointly published a new "Guide for Employers and Trustees on providing support with financial matters without needing to be subject to regulation".
  • Finance Bill: The new Finance Bill revives the government's proposals for the reduction of the money purchase annual allowance and the improvement of the income tax exemption for employer-arranged pensions advice, to take effect for the current and future tax years.
  • Investment consultancy market: The FCA has referred the pensions investment consultancy market (including fiduciary management and master trust offerings) to the Competition and Markets Authority.
  • Pensions Regulator – scheme governance: The Pensions Regulator has launched a new campaign, "21st Century Trusteeship – raising the standards of governance". Targeted emails will direct trustees, scheme managers, employers and advisers to a new page on the Regulator's website describing clear standards that the Regulator expects schemes to meet.
  • DC investment transaction costs: The FCA has published a policy statement to require firms managing funds for DC workplace pension schemes to disclose administration charges and transaction costs, on request, to trustees or governance bodies using a standard approach.
  • Pension scams: The government has published draft provisions for a 2018 Finance Bill covering the proposed new power for HMRC to refuse to register a scheme, and a power to de-register an existing scheme, where the scheme is an unauthorised master trust or has a dormant employer.
  • Pension freedoms inquiry: Parliament's Work and Pensions select committee has launched a new inquiry into whether and how far the pension freedom and choice reforms are achieving their objectives and whether policy changes are required.

Pension protection levy

The PPF has published a joint policy statement and consultation on the draft 2018/19 pension protection levy determination and associated documents. The consultation closes at 5pm on 1 November 2017.

The PPF proposes that most of the changes proposed in March 2017 for the new triennium (see WHiP Issue 64) will be implemented. Headline proposals are as follows:

  • The overall levy estimate will be reduced by 10%, with two-thirds of schemes expected to see a levy reduction and SMEs expected to be particular beneficiaries. Some very large employers' schemes could, however, see significant increases.
  • The PPF will be introducing new standard form contingent asset agreements (on which the PPF is consulting until 21 November 2017). There are significant changes proposed, especially in respect of the fixed cap option for guarantees and charges. The PPF will not require existing contingent asset agreements (including any new ones executed before the current standard forms are formally replaced) to be amended or re-executed in order to qualify for re-certification for the 2018/19 PPF levy year. It will, however, probably require changes to be made to existing agreements for the 2019/2020 PPF levy year and thereafter.
  • Trustees certifying type A contingent assets (guarantees) will be required to have obtained a report, with specified content, from a professional adviser if the guarantee will secure a levy reduction of £100,000 or more. (This replaces the original proposal which would have required a report where the trustees certify a "realisable recovery amount" of £100 million or more.) The report concerns the ability of the guarantor to pay the sum certified as the realisable recovery amount.

VAT on insurers' investment fees

HMRC has issued a Brief to announce that from 1 January 2018 it is discontinuing its policy of allowing insurers to treat their supplies of non-SIF (special investment fund) pension fund management services as VAT exempt insurance. This is expected to affect some DB pension schemes.

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