Government loses patience with the DC providers
Further intervention in the DC market looks like a given with an announcement by George Osborne on Wednesday that HM Treasury is to consult next month to ensure that people,particularly those aged 55 or over, are not charged excessive early exit penalties, and to make the process for transferring pensions from one scheme to another quicker and smoother, to help people make use of the new freedoms. The Chancellor also said that so far 60,000 people have taken advantage of the new flexibilities.
The Economic Secretary to the Treasury, Harriett Baldwin, has written to Martin Wheatley, CEO of the FCA, confirming that the FCA will, in tandem with the Government’s consultation, gather information from providers to understand the scale of the problems facing individuals who want to transfer to a different pension provider.
Comment
With Iain Duncan Smith also threatening last week to “name and shame” providers “putting barriers in the way of people getting access to their money” the stage seems to be set for a most political consultation as the Government’s flagship pension policy comes under enormous strain, due in no small measure to its rushed implementation.
What is becoming clear is that many of the apparent “failures” are of the Government’s own making. Individuals are angry and upset that they may need to seek what they see as unnecessary and costly independent financial advice before accessing their money, but this was imposed by the Government in relation to “safeguarded benefits”. They then have difficulty finding someone who will advise them, but this is a consequence of the rushed implementation. They also don’t understand why they are being pointed to Pension Wise – but this is also a Government requirement – or why it takes so long to transfer their retirement funds to another provider – but this is understandable in an environment in which pension scams abound. And as “safeguarded benefits” have been defined by the Government in the negative (being neither money purchase nor cash balance) there is uncertainty as to whether some products fall within scope of the independent advice requirements or not.
Hopefully the consultation to come will tease out all these issues and move on from the campaigns running in a number of newspapers. But the last thing we need right now is yet more regulation. Providers and advisers need time to rise to the challenge being presented by the new landscape and Government needs to listen to their concerns.
OBR warns of cost of the triple lock
The Office for Budget Responsibility has warned George Osborne that sticking to his pledge to continue the state pension triple lock guarantee risks pushing Britain back into the red in the coming decades.
In his recent Mansion House speech Mr Osborne announced his intention to introduce a fiscal framework within which governments now and in the future will have a permanent commitment to run budget surpluses under “normal” economic circumstances. Such a framework, he claimed, would “move Britain from crisis and recovery and towards a new settlement of responsibility and prosperity”.
But the prospects for such a plan working in practice were dealt a blow in the latest Fiscal sustainability and Welfare trends reports from the OBR, which warned that our ageing population and generous pension spending could push Britain back into the red without further swingeing cuts.
Both reports discuss in some detail the unexpectedly high cost of the triple lock – in 2014/15 alone it is estimated to have cost £2.9 billion – £2.4 billion more than originally forecast – due to a combination of higher inflation and lower average earnings growth.
Comment
This observation from the OBR chimes with that from the Institute for Fiscal Studies when in the run up to the General Election it analysed the pensions policies of what then were the three main political parties. But it seems unlikely that the Government will take early action to end the triple lock – indeed it has promised to keep it for the duration of this Parliament.
HMRC suspends its list of recognised overseas schemes
HMRC’s latest newsletter covers a number of issues, but the most important relates to Recognised Overseas Pension Schemes (ROPS). In recent weeks HMRC’s QROPS list has been renamed as its list of ROPS notifications thus emphasising the fact that even if a scheme is on this list, further checks will be needed in order to establish whether it is a QROPS and so acceptable for transfer purposes. The newsletter also warns that the list has been temporarily suspended between 17 June and 1 July and that the reformatted list “will look significantly different”.
Further detail is supplied in a separate announcement which makes clear that the reason for suspension is in order to remove those schemes that could potentially pay out transferred benefits to a member under the age of 55. We understand that some weeks ago HMRC wrote to ROPS asking them to confirm by 17 June that they would not ordinarily permit payments to be made before this age – as a direct result of a change to UK legislation effective from 6 April 2015.
The newsletter also revisits the new in-year repayment processes for individuals taking pension flexibility payments discussed in newsletter 68 (see Pensions Bulletin 2015/16). In particular, it stresses that to take advantage of the 30 day priority process for such payments, individuals will need to use the three new forms now in use (P50Z, P53Z and P55) rather than the standard (P50 and P53) forms.
The newsletter also covers changes to the tax forms associated with ROPS, reporting deadlines for schemes operating relief at source, changes of procedure for obtaining certificates of residence and the guidance available for using pension schemes online.
As a point of interest, the newsletter also reveals that in the 2014/15 tax year, HMRC received half as many applications to register pension schemes than it did in 2013/14.
Comment
The suspension of the ROPS notification list is entirely appropriate as it had clearly become unreliable following the changes to legislation effective from 6 April 2015. Many UK schemes processing transfers overseas may wish to wait until they see the new list.
Measuring inflation: have your say on the options for change
Following Paul Johnson’s independent review of UK consumer price statistics, published at the start of 2015 (see Pensions Bulletin 2015/02 for more detail), the UK Statistics Authority has now launched a consultation in order to “consider contributions from all those who have an interest in consumer price statistics”.
The consultation asks for responses on questions such as: Should the ONS identify a main measure of inflation and if so, what and why; should the ONS seek to measure the changes in prices experienced by different households and if so, how and how often; and which RPI-related sub-indices are being used and which are users happy to see discontinued.
Also annexed to the consultation document is the ONS’s “Consumer price statistics work plan” and the Authority has also invited comments on the priorities set out therein.
The consultation will close on 15 September, with a summary of responses expected in the autumn and a final report scheduled for early 2016. In the interim, the Authority will hold a series of events at which users can discuss any issues raised in the consultation. The first of these will be on 24 June.
Comment
The consultation document is essentially a fact-finding survey building on Paul Johnson’s recommendations and it will be interesting to see how the responses stack up. The timeframe for the final response from the Authority has already slipped (it was originally expected “later in 2015”) which may therefore continue to complicate pension increase decisions for some in the meantime.
Using HMRC to reconcile GMP and membership data: time is running out!
PASA, the Pensions Administration Standards Association, has published a call to action encouraging trustees and scheme administrators to start using HMRC’s Scheme Reconciliation Service to reconcile GMP and membership data as soon as possible. The leaflet reminds trustees and scheme administrators that requests for reconciliation data have to be made by April 2016 and that there is likely to be pressure on HMRC’s resources in the period to the end of 2018 (after which they will only provide support for individual member queries).
The call to action is the first piece of guidance issued by PASA’s new GMP Working Group, which has been tasked with identifying, agreeing and implementing a set of industry standards and guidance that will allow HMRC and scheme administrators to effectively complete such reconciliations on time.
Code of conduct for transfer of administration providers launched
PASA has also published a Code of Conduct that it expects administrators will adhere to in circumstances where the administration of the pension scheme is passing from one provider to another.
This Code applies to both the ceding administrator and the newly appointed administrator. PASA expects all pensions administrators, whether TPA or in-house, to demonstrate their adherence to the Code as part of the evidence required to support any application for accreditation.
Insolvency Service moves to wind up the corporate trustee of the Capita Oak scheme
Imperial Trustee Services Ltd, the trustee of the Capita Oak Pension Scheme has been placed in provisional liquidation by the Insolvency Service. The Pensions Ombudsman had previously issued a statement outlining concerns around the Capita Oak scheme (see Pensions Bulletin 2015/19 for more detail).
The role of the provisional liquidator is to protect assets in the possession or under the control of the target company pending the determination of a petition before the Court. The provisional liquidator also has the power to investigate the affairs of the target company insofar as it is necessary to protect assets including any third party or trust money or assets in the possession of or under the control of the company.
Comment
This looks like a sweeping up exercise by the authorities as the corporate trustee had already been replaced as the trustee to the Capita Oak Pension Scheme by the Pensions Regulator.
Who is “a Scottish taxpayer”?
If you wanted to know what it takes to become a Scottish taxpayer (for the purposes of the Scottish rate of income tax, as introduced by the Scotland Act 2012) you could do worse than check out draft technical guidance that has been published by HMRC.
For most it will be a simple matter – living in Scotland will suffice. However, it can get a whole lot more complicated for some. But having a Scottish surname, or occasional kilt wearing at weddings and the like will not by themselves count.
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.
