Cabinet reshuffle, Budget date uncertainty and pensions tax rumours intensify
Last week’s Cabinet reshuffle was more extensive than most observers thought it would be, especially given the unexpected resignation of Sajid Javid as Chancellor of the Exchequer before he had delivered his first Budget.
By contrast, there was no change at the DWP with Thérèse Coffey remaining Secretary of State and Guy Opperman remaining Under Secretary of State for pensions and financial inclusion. The new Cabinet and ministerial posts are at this link.
After initial reticence from the Government, on 18 February the new Chancellor of the Exchequer, Rishi Sunak, confirmed that the Budget will be happening as scheduled on 11 March.
Comment
We said back in January that there should be nothing to stop the Budget going ahead on 11 March (see Pensions Bulletin 2020/01), but hadn’t reckoned on a change of Chancellor in the run up to Budget Day!
And perhaps the fact that the pensions tax relief rumours (see Pensions Bulletin 2020/06) have strengthened rather than abated under the new Chancellor is strongly suggestive that pensions tax contribution relief could be in the firing line on 11 March for those paying higher (40%) and additional rate (45%) income tax.
PMI launches Professional Trustee accreditation
The Pensions Management Institute has launched an accreditation programme for professional trustees which appears to be in competition with that due to be launched shortly by the Association of Professional Pension Trustees that the Pensions Regulator referenced in its Trusteeship and governance consultation response document published on 10 February (see Pensions Bulletin 2020/06).
The PMI’s programme will open from 24 February and will require an initial application to be passed, the details of which are spelt out in the PMI’s press release.
We understand that the APPT’s accreditation scheme will launch at the beginning of the 2020/21 financial year.
Both seem to reference the standards developed by the Professional Trustee Standards Working Group in conjunction with the Pensions Regulator, which were settled in February 2019 (see Pensions Bulletin 2019/08).
Comment
We are curious as to why two professional trustee accreditation processes are to be launched virtually side by side, especially as we understood the original intention to be that the APPT would oversee an accreditation process run by the Pensions Management Institute.
Auto-enrolment parameters for 2020/21 announced
The Government has announced the earnings trigger and qualifying earnings band for auto-enrolment purposes for 2020/21. The earnings level above which individuals must be auto-enrolled will remain frozen (as it has been since 2014/15) and the band of earnings on which minimum contributions should be based will still be aligned to the Lower and Upper Earnings Limits for national insurance purposes. Therefore for 2020/21:
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The automatic enrolment earnings trigger will be maintained at £10,000
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The lower limit of the qualifying earnings band will be £6,240; and
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The upper limit of the qualifying earnings band will be £50,000
The necessary Order will be laid before Parliament after the February recess and the accompanying analysis will be published in due course.
Comment
None of this is a surprise, but once again the Government has failed to use a simple mechanism at its disposal to start to move the qualifying earnings band down, in order that contributions can start on the first £1 of earnings – as the Government announced, back in 2017, that it would achieve by the mid-2020s (see Pensions Bulletin 2017/53).
However, the repeated freezing of the £10,000 earnings trigger will be good news for lower-paid workers, more of whom will be brought into the scope of automatic enrolment as earnings rise – particularly those earning the national living wage who will have seen their wages increase by over 20% in the four years ending this April.
Regulator decides to take no action in House of Fraser pre-pack
In recent years the Pensions Regulator has come under criticism when “pre-pack” insolvencies result in the removal of employer support for a DB pension scheme, with the likely result that the scheme ends up in the Pension Protection Fund. So it is no surprise to hear about the Regulator’s activities in the House of Fraser pre-pack administration that took place in August 2018 as we now are through the publication this week of its regulatory intervention report.
This report reveals that the Regulator’s involvement with House of Fraser dates back to at least November 2017 where it engaged with the company and scheme trustees because of concerns about the House of Fraser group’s financial strength. By May 2018 a company voluntary arrangement was under active consideration, which had it gone ahead would have put the DB scheme into PPF assessment.
However, it proved not to be viable, resulting in an accelerated mergers and acquisitions process being undertaken in August 2018, concluding later that month with administrators being appointed and a pre-pack sale taking place on the same day to Sports Direct.
The Pensions Regulator started its investigation in September 2018 but found nothing to conclude that the timing of the August 2018 insolvency was deliberately manipulated, that it occurred too soon or was mismanaged, or that there were acts or transactions pre-dating the administration that warranted further investigation.
The Regulator concluded, on the basis of the evidence it reviewed, that further investigations into whether there was a case to support issuing a Contribution Notice would not be appropriate. Moreover, there was insufficient evidence to support further investigations to pursue a Financial Support Direction.
Comment
This latest regulatory intervention report tells us little that we don’t know about the Regulator’s attitude to pre-packs resulting in the withdrawal of employer support to its DB scheme – the Regulator is highly likely to investigate whether there are grounds for it to take anti-avoidance action, even if, as in this case, it concludes that there are none.
Will the retirement you get be the retirement you want?
The DWP has highlighted its ongoing campaign to get people to engage more with their retirement savings and whether they can expect the level of income they hope for in retirement.
The dedicated page on the DWP website brings together a number of different practical resources – including for example links to the state pension forecaster and the pensions tracing service – that members could find useful when planning for retirement.
Comment
These resources, together with the PLSA’s retirement living standards initiative and the Institute and Faculty of Actuaries’ subsequent estimate of the cost of delivering those living standards (see Pensions Bulletin 2019/42), will we hope encourage those who can put more away for retirement, to do so.
