Be “Pension wise” – by using the pensions guidance service
The Treasury has revealed that Pension wise is the brand name chosen for the pensions guidance service being provided to help people make the most of the pension flexibilities being introduced from April. So when accessing the free and impartial online, face to face and telephone guidance, the public will see the brand “Pension wise”. The Pensions Advisory Service and Citizen’s Advice Bureaux will use the new name and logo, being the Government’s delivery partners for the service.
The Treasury has also published its latest progress report on delivering the pensions guidance promised by the Chancellor.
The need for Pension wise to succeed is perhaps underlined by a new report from Age UK which suggests that, given the moderate size of the average pension pot, even someone prudently drawing money out could easily exhaust their pot within a few years. Age UK has called on pension providers to develop tools to help people budget, control their spending and set aside money for future goals so that they are better placed to ensure they don’t just run out of money.
Pension scams – Ombudsman sets out its position
The Pensions Ombudsman has published a pensions liberation update setting out the details of three cases where personal pension providers have been subject to complaints because they refused to make transfer payments to suspected pension liberation vehicles. These follow on from the “Mr X” case that we reported in Pensions Bulletin 2014/52.
Pension legislation gives scheme members a statutory right to a transfer payment if certain conditions are met. This causes a great deal of difficulty for providers (including the trustees of occupational schemes, who are in a similar position to the personal pension scheme providers concerned in these cases) where they receive a request to transfer to something that looks like a pension liberation vehicle.
In two of the cases the Ombudsman found that the member had no statutory right to a transfer and therefore he declined to uphold the complaints. In the third the Ombudsman found that, while there was also no statutory right there was a discretion under the scheme rules to pay a transfer value. As the provider had not exercised its discretion properly the Ombudsman directed it to consider payment (though with a strong warning to the complaining member that he should take professional advice before making a further transfer request).
One of the requirements for a statutory right to be established is that the receiving scheme is an occupational pension scheme. The tests for determining this were set out by the High Court in the Pi Consulting case (see Pensions Bulletin 2013/44). In two of the cases before the Ombudsman it was held that the receiving schemes failed one of these tests (the purpose test) because the receiving schemes did not have the “purpose of providing benefits to, or in respect of, people with service in employments of a description”. In the third case the scheme failed the tests because the member was not an “earner” in relation to it.
Comment
This may be helpful for the trustees and administrators of pension schemes. If a suspected liberation vehicle fails the tests for being treated as an occupational pension scheme then trustees will be entirely within their rights to refuse to pay out.
New social media campaign to help avoid pension scams
The Pensions Advisory Service and the Association of British Insurers have launched an online social media campaign to help raise consumer awareness about the risks and consequences of pension scams.
Alongside the new campaign, an infographic looks at the techniques scammers use and what the real life consequences are. It also provides the top five tips on how to avoid being scammed, what to do if you’re not sure about what’s being offered and who to contact if you think you’re already a target.
Pension Schemes Bill completes Committee stage in the House of Lords
The Pension Schemes Bill completed its Committee stage in the House of Lords on Monday and is now scheduled for Report stage on 27 January. Royal Assent is expected in February, immediately prior to which there will be the inevitable “Ping-Pong” between the Houses. There is also now a further new version of the Bill as it stands after Committee stage.
Unlike the substantial changes moved by the Government shortly before the Bill left the Commons (see Pensions Bulletin 2014/49), the changes made in the Lords are modest and largely technical in nature.
The most significant are within the proposed legislation that is consequential to the pension tax freedoms being introduced in the Taxation of Pensions Act 2014. They include the following:
- The extension of pensions guidance to survivors of pension scheme members
- Requiring independent advice to be taken before a member or survivor is paid a lump sum that is an uncrystallised funds pension lump sum; and
- Enabling schemes to extend any drawdown facility they introduce to nominees or successors
Comment
The Bill is now settling down as it completes its final stages of the legislative process, although it seems likely that further adjustments will be introduced at Report stage. Once Royal Assent is achieved the focus will shift to the necessary regulations on which the Department for Work and Pensions is presently engaged. These will need to be finalised and laid in short order as legislative time is fast running out.
Details of the Government’s automatic transfer reform solution expected next month
Giving evidence before the Work and Pensions Select Committee on Monday, pensions minister Steve Webb told MPs that the Government’s automatic transfer reforms will initially be rolled out on an “opt-in” basis with 20 of the UK’s largest pension providers, with the intention being that pension scheme members will need to make an active choice to participate in the “pot follows member” initiative. The majority of the market would then be covered by the reforms within 18 months.
Detailed plans on the Government’s solution to the problem of small pots and how it will work in practice are now expected to be published next month. The automatic transfer system itself is expected to be launched in autumn 2016.
Steve Webb said: “We plan to do it on an opt-in rather than opt-out basis, so that eventually money will follow you by default. There are issues about pension remuneration, matching pots and so on that are slowing us down, so to get the thing going, we are going to do it on an opt-in basis to begin with”.
Workers move away from “full stop” retirement
New research by YouGov for the Department for Work and Pensions has provided further evidence of the change in older people’s attitudes to retirement and working in later life.
YouGov found that only one in six workers over age 50 now believe that working full time and then stopping altogether would be the best way for them to retire. Instead, over a third of over 50s still working favour going part-time or working flexibly before retiring altogether, with a quarter favouring taking a sizeable break and then returning to work, rather than retirement.
Almost half of those under age 65 who are still working would like to keep going between ages 65 and 70.
Comment
The attitudes of older people to retirement are changing and the flexibilities being introduced from April 2015 mean that pensions are well placed to meet those changing needs. It may be more difficult for employers to be as adaptable.
Public service pension schemes code laid in Parliament
The Pensions Regulator has published a draft of its new Code of Practice to help public service pension schemes meet governance and administration legal requirements. The draft has also been laid before Parliament and will come into force from 1 April 2015.
Draft Code of Practice 14 is directed particularly at scheme managers and pension board members of public service schemes. It sets out the standards of conduct and practice expected of them in areas such as knowledge and understanding, conflicts of interest and representation, and internal controls. It also includes guidance regarding areas such as scheme record-keeping, maintaining contributions, providing information to members and resolving disputes to help them comply with legislation, including new requirements which come into force in April 2015.
The Code is accompanied by an eight-page guide intended to give scheme managers and pension board members an overview of the main features of the Code.
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.
