Government to legislate to remove NEST restrictions
Pensions minister Steve Webb has announced that the Government will remove the annual contribution limit and transfer restrictions on NEST, as promised last summer when he hailed the early success of NEST (see Pensions Bulletin 2013/29). This follows a recent confirmation that the European Commission will not oppose the move.
Draft legislation is to be consulted on this autumn that will remove the annual contribution limit of £4,600 and the bulk transfer restrictions on 1 April 2017. The intention is also to retain the option to remove the individual transfer restrictions from 1 October 2015 – possibly at the same time that automatic transfers are introduced.
Comment
As we said in July 2013 on balance this decision seems right. And now that NEST has got through its first couple of years these changes will place it on a more equal footing with other providers in the same market.
Pension contributions tax relief under threat once more?
The Liberal Democrats’ pre-manifesto for next year’s general election includes a pledge to “establish a review to consider the case for, and practical implications of, introducing a single rate of tax relief for pensions, which would be designed to be simpler and fairer and which would be set more generously than the current 20% basic rate relief”.
The Lib Dems also pledge to legislate to make the current state pension triple lock guarantee permanent, and to raise the income tax personal allowance from £10,500 to at least £12,500.
Conservativehome, an independent Conservative blog website, has also published its own manifesto that includes plans for a “fair share of pensions tax relief”. It states that “upfront tax relief on pensions is worth between £20 and £30 billion a year, but this disproportionately benefits the wealthiest savers. A fairer allocation of this vast amount of money is needed to provide ordinary working people with a greater incentive to save. The highest rates of relief should go to savings made from the lowest incomes”.
Regulator asks for Value at Risk data to be included in scheme returns
The Pensions Regulator has announced that it will be asking for the following additional pieces of information in defined benefit scheme returns for 2014/15:
- Financial assumption information for schemes in surplus – comprising discount rates, discount rate structure, pay increase and inflation assumptions
- Value at Risk (VaR) information – a VaR calculation is a measure of the size and likelihood of the potential investment risks facing a scheme over a given time (typically an estimate of the additional deficit which could arise over a period of time and with a certain level of probability). It is usually calculated by the scheme actuary or investment consultant. At this stage it appears that the Regulator is collecting the VaR information solely to increase its understanding of DB pension scheme risk generally, rather than for any specific purpose
- Asset-backed contributions (ABCs) – information relating to the structure, valuation and term of the ABC
The Regulator has published a checklist to help schemes complete this new information.
In line with previous years, the Regulator has indicated that it expects to send out the scheme return notices between November and January.
Comment
The financial assumption information should not be an onerous addition to the scheme return, whilst the ABC information is likely required for PPF purposes (see Pensions Bulletin 2014/22). But whilst there are good reasons for a scheme to want to know its VaR, it is not a figure every scheme will have to hand.
This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law. For further help, please contact David Everett at our London office or the partner who normally advises you.
