Snap general election – important pensions tax measures delayed?
The Prime Minister announced on Tuesday that she will be seeking a General Election on Thursday 8 June. Under Section 2 of the Fixed-term Parliaments Act 2011 a motion of the House of Commons for an early general election is required. This was passed by a vote of the House with the required two-thirds majority yesterday and so there will be a General Election on 8 June.
So what does this mean for pensions legislation? We expect that the current Pension Schemes Bill, with its provisions regarding master trust regulation and pension scheme charges (see Pensions Bulletin 2016/43) will receive Royal Assent before this Parliament ends.
More problematic is the fate of the current Finance Bill. This includes very important pensions tax provisions such as the reduction to the money purchase annual allowance, overseas pension matters (such as the new tax charge on QROPS transfers and the ending of tax relief on “Section 615” schemes), the pensions advice allowance and the tax treatment of salary sacrifice arrangements (see our News Alert). All of these are intended to have effect from April 2017.
Comment
Yet more uncertainty. At the very least a truncated version of the Finance Bill providing for general tax raising powers needs to obtain Royal Assent before the dissolution of Parliament, expected to be a minute past midnight on 2/3 May, with the rest of the measures potentially being held over for a new Finance Bill following the election.
Therefore, there will probably now be a significant delay before the pensions tax measures in the Bill are finally enacted. And once this Parliament is dissolved any measure that has not reached Royal Assent simply expires leaving HMRC without any authority to operate it. Such lost measures will need to be reactivated in a new Finance Bill which may not obtain Royal Assent until the autumn.
We now await the parties’ manifestos. There is already speculation that the “triple lock” by which state pensions are increased in payment may not survive the new Parliament.
LCP examines the fee paradox in our latest investment management fees survey
LCP’s sixth survey on investment management fees examines a number of issues, starting with the paradox that investment manager fee rates are down, but investors are paying more.
This is due to the increase in assets under management in recent years, driven primarily by general rises in equity and bond markets. Whilst acknowledging that paying for assets to be well-managed may be worth it, the survey finds no noticeable link between charging a higher fee and delivering better performance. It suggests that active managers should move away from fee structures that are a percentage of assets as they give an incentive to take little risk and to deliver index-like performance.
The survey also contains a review of transaction costs, finding that there continues to be a lack of consistent and transparent reporting in this area. Amongst other things, this makes the life of DC pension scheme trustees difficult. Since 2015 they have had to report on the level of transaction costs in their annual Chair’s Statement, but it would seem that until, at the very least, the FCA’s proposals are finalised (see Pensions Bulletin 2016/40) the fog will not completely lift from this important aspect of governance.
Comment
The survey once more contains a wealth of information and insightful comment in an area that is likely to undergo significant change as a result of various initiatives being undertaken by the FCA, not least of which is its asset management study whose findings are now imminent.
Pensions dashboard prototype now available
As promised (see Pensions Bulletin 2017/15) a prototype of the pensions dashboard has now been unveiled as part of FinTech week. This has provided the necessary proof that it is possible to build such a facility under which multiple pension schemes and providers are connected in order that individuals can see their pension savings in one place.
The Government has also confirmed that the dashboard will be offered by a range of different providers rather than a single, central service.
Much work now needs to take place before dashboards can become a reality in 2019. Coverage will need to be near-comprehensive and so include the state pension, DC and DB pensions (both in the private and public sector), an appropriate regulatory framework needs to be delivered and a governance body and/or implementation entity set up.
Comment
Although a website has now been launched containing many aspects about the project and the Pension Dashboard TechSprint held as part of FinTech week has given a flavour of how pension dashboards can revolutionise retirement planning for ordinary pension savers, the actual prototype is not yet available for interested parties to play with. Nevertheless, this is a great step forward. Now comes the hard work of turning this proof of concept into an online reality that will be of benefit to individuals undertaking retirement planning.
HMRC publishes “new regime” ROPS notification list
HM Revenue & Customs has published its latest list of foreign schemes that have notified it that they meet the conditions necessary to be regarded as a recognised overseas pension scheme (ROPS). The significance of this new list is that only those schemes that in recent weeks have given an undertaking to HMRC that they will operate the overseas pensions transfer charge being legislated for by the Finance Bill (see Pensions Bulletin 2017/11) are included.
Comment
Unsurprisingly, the list is much shorter than the last list under the “old regime” which was frozen on 14 April 2017, but although containing about 30% fewer schemes, the reduction has been spread more or less evenly across countries (with Guernsey being a notable exception with a greater percentage reduction in schemes included).
FCA consults on employer and trustee factsheet
The Financial Conduct Authority has issued a consultation document setting out proposed guidance in response to four recommendations from the Financial Advice Market Review which reported in March 2016 (see Pensions Bulletin 2016/10).
The fourth of these is a draft employer and trustee factsheet which sets out what help employers and trustees can provide on financial matters without being subject to regulation. This factsheet contains no surprises. For example, it makes clear that “advice” should be constrained to providing general information and support, and providing information about an occupational pension scheme would not normally be a financial promotion. It goes on to state that if employers wish to communicate promotional material to their employers about a group personal pension or a stakeholder pension scheme they do not need it to be approved by someone authorised by the FCA so long as the material meets certain criteria. It also makes the distinction that trustees will of course also need to bear in mind that, unlike employers, they have a fiduciary duty to their membership and therefore will need to carefully consider whether it would be appropriate for them to offer any advice, in their capacity as trustees, to members.
Consultation on most of the proposals, including the factsheet, closes on 11 July 2017. Further proposals on other of the FAMR recommendations will be set out in the summer and the FCA intends that the whole package of measures will take effect in January 2018.
HM Treasury and the FCA have also published a progress report on the implementation of the Review’s recommendations.
Comment
This seems to be little more than necessary housekeeping as the messages within the document, with the exception of the extension to address trustees as well, are virtually the same as that in a guide for employers issued by the FSA which will be withdrawn once the factsheet is finalised. Nevertheless, employers and trustees worried about the risk of crossing the regulated advice boundary without being authorised are likely to welcome this factsheet.
FRC consults on a refreshed Practice Note 15
The Financial Reporting Council has launched a consultation on an updated but shortened new version of the Practice Note used by auditors of occupational pension schemes.
Practice Note 15: The Audit of Occupational Pension Schemes in the United Kingdom (PN 15) has needed to be significantly revised to reflect the updated regulatory landscape, the implementation of FRS 102 and that of revised ISAs (UK) in 2016. The revised Practice Note takes account of master trusts which are not specifically addressed in the current version, and includes updated material for the auditor’s responsibilities for statements of contributions and on liaising with scheme actuaries.
The revision has also been used to prompt enhanced auditor scepticism when making an assessment of going concern in respect of a scheme that is subject to audit.
Consultation closes on 30 June 2017. The FRC intends to issue a final version of PN 15 in the autumn, and at the same time will withdraw Practice Note 22 – The Auditors’ Consideration of FRS 17 – Retirement Benefits – Defined Benefit Schemes as necessary guidance is now included in auditing standards issued by the FRC.
Comment
This is a workmanlike and necessary piece of housekeeping. It is also pleasing to see that the opportunity has been taken to reduce, from 177 to 76 pages, this key reference document that supports best practice for pension scheme auditors.
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.
