Pensions Bulletin 2017/06

Pensions Advice Allowance details announced

HM Treasury has confirmed details of the Pensions Advice Allowance – the new facility enabling individuals to withdraw up to £500 from their pension pots tax-free to put towards the cost of pensions and retirement advice – and has published its response to the consultation on the proposals that it put forward last August (see Pensions Bulletin 2016/35).

The £500 allowance:

• Can be used a total of three times (so up to £1,500 in total), but only once in a tax year, and will be available at any age, allowing people of all ages to engage with retirement planning

• Can only be redeemed against the cost of regulated financial advice, including “robo advice” as well as traditional face-to-face advice, and covering holistic retirement advice (including the implementation of such advice) rather than just the single pension product from which the advice fee is taken

• Can be used alongside the separate tax exemption for employer-arranged pensions advice; and

• Will be available to holders of DC pensions and hybrid pensions with a DC element, but not DB or final salary type schemes

Pension providers will be able to offer the allowance to their members from 6 April 2017. However, the Government stresses that providers do not have to offer this new facility, nor will pension scheme administrators have to provide information to HMRC on the extent to which it is used. Furthermore, the individuals concerned need only self-declare that they have not used up their three goes (or used it at all in the same tax year), with there being no onus on administrators to keep records.

Separately, HMRC has published draft regulations that will implement this, along with a policy paper. HMRC will also publish full guidance on the allowance shortly after it comes into force.

HMRC announces a miscellany of topics

HMRC’s Pension Schemes Newsletter 84 covers seven subjects, including the following:

• The recent minor changes to the provision of information regulations (see Pensions Bulletin 2017/03)

• The removal of “beta” status from HMRC’s annual allowance calculator following changes announced previously (but see Pensions Bulletin 2016/45 for some concerns we noted then which have not been addressed); and

• An extension of the drawdown pension tables (applying for “capped drawdown” policies) that have been necessitated by gilts yields falling below 2% pa. The tables have also been presented on a unisex basis. The new tables should be used from 1 July 2017

The newsletter also apologies for the continuing delay in launching the look up service for pension scheme administrators to check the lifetime allowance protection status of members. The launch had been intended for last October.

DWP extends auto-enrolment easement for those with 2016 lifetime allowance protections

The DWP has laid regulations that turn the employer duty to auto-enrol certain jobholders into an automatic enrolment scheme, into a power, where the employer has reasonable grounds to believe that the jobholder holds Fixed Protection 2016 or Individual Protection 2016.

This extension to what already applies in relation to other lifetime allowance protections delivers on a promise made by the DWP in 2016 when it delivered regulations that turned the employer duty into a power in a number of other situations (see Pensions Bulletin 2016/10).

The Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2017 (SI 2017/79) come into force on 6 March 2017.

DWP announces expert group to assist with auto-enrolment review

The DWP has announced the membership of the external advisory group that will support the 2017 review into automatic enrolment.

Three themes are to be considered by this group as follows:

• Coverage – to be led by Jamie Jenkins, Head of Pensions Strategy at Standard Life

• Engagement – to be led by Ruston Smith, Trustee Director at Peoples’ Pension

• Contribution levels – to be led by Chris Curry, Director of the Pensions Policy Institute

Terms of reference for the advisory group have been produced along with some initial questions, responses on which are sought by 22 March 2017.

Auto-enrolment earnings parameters – draft Order published

The draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2017, which will give effect to the 2017/18 earnings parameters agreed in December (see Pensions Bulletin 2016/50), has been published.

National Audit Office criticises Government handling of lump sum payments from police and firefighters’ pension schemes

The National Audit Office has published its findings concerning the underpayment of around £711m of lump sums to some 34,000 police and firefighters who retired between 2001 and 2006. This follows the Pensions Ombudsman’s decision in March 2015 that such underpayments amounted to maladministration by the Government Actuary’s Department (see Pensions Bulletin 2015/22).

Whilst the NAO criticises the Government’s failure to handle the situation appropriately right up until the Ombudsman’s decision in 2015 and as a result prolong the investigations, it also finds remedial actions have been made since the Ombudsman’s decision – namely that the Treasury is satisfied that a significant majority of compensatory payments have now been made, GAD has made changes to its internal controls to regularly monitor and engage with relevant departments, and pension boards with independent oversight and representation from pension scheme members have been introduced.

The State Pension triple lock

The House of Commons Library has updated its briefing paper on the current mechanism for updating the Basic State Pension and the single tier State Pension. This excellent document tells you all you need to know about the subject, including what the triple lock is, where it came from and whether it will survive.

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.