Pensions: Living longer — impact of working from home on older workers

Contents:

• Pension Scheme Newsletter 132

• The Pensions Ombudsman publishes corporate plan for 2021–24
• PASA sets up Benefit Statements Working Group
• Living longer: impact of working from home on older workers
• BW: COVID-19 impact on life expectancy

 

 

Pension Scheme Newsletter 132

(AF3, FA2, JO5, RO4, RO8)

Pension Scheme Newsletter 132 covers the following:

Relief at source:

• annual return of information – interim payments.
• APSS106 annual claims for tax year 2020/21.
• reporting excess relief.

Annual allowance:

• pensions saving statements for tax year 2020/21.

Pension scheme migration:

• viewing pension schemes.
• schemes without Pension Scheme Tax References (PSTRs).
• wound up pension schemes.
• multiple IDs.

Area of particular interest

Annual allowance – pension saving statements for tax year 2020/21

A further reminder that the deadline for issuing annual allowance pension savings statements to tax year 2020/21 is 6 October 2021.

Schemes must issue these automatically to members who have made pension savings of more than the standard annual allowance of £40,000 or money purchase savings of more than £4,000 where they believe the money purchase annual allowance applies to the member.

Where the member has exceeded their annual allowance and does not have sufficient carry forward allowance available from previous years, an annual allowance charge will apply.

 

 

The Pensions Ombudsman publishes corporate plan for 2021–24

(AF3, FA2, JO5, RO4, RO8)

The Pensions Ombudsman (TPO) has published its Corporate Plan for 2021–24, which outlines TPO's strategic direction for the next three years and its priorities for the current year. Throughout the COVID-19 pandemic TPO has continued to focus on resolving complaints at an early stage and improving the customer journey.

Despite the continuing trend of rising demand and pension complaints becoming increasingly complex, TPO closed 4,853 pension complaints during 2020/21 representing an increase of almost 6% compared to the previous year.

The challenge over the coming year is to continue to meet this long-term trend of increasing demand without a corresponding increase in resource. This is particularly crucial as demand is likely to increase further as the full impact of the COVID-19 pandemic on the economy and people’s changing financial circumstances evolves.

TPO’s Corporate Plan 2021-2024 outlines the assumptions, forecasts and actions required to meet this challenge along with the new KPIs introduced to measure progress against strategic goals.

During 2021/22 TPO will continue to build on the progress already made throughout its transformational journey. By listening to its customers and stakeholders, TPO will seek to further improve the customer journey with a particular focus on reducing customer journey times. 

 

 

PASA sets up Benefit Statements Working Group

(AF3, FA2, JO5, RO4, RO8)

In a Press Release, the Pensions Administration Standards Association (PASA) has announced the establishment of a new Benefit Statements Working Group, which will evaluate the opportunities and concerns for the trust-based pensions community in delivering the Government’s objectives for benefits statements.

This will consider three key requirements:

• The introduction of a ‘Statement season’.
• The legislative, regulatory or process changes required to support the delivery of these statements.
• Guidance for Trustees, Administrators and Sponsors.

It also highlighted a number of key hurdles that will need to be overcome:

• What administrators need to make a statement season work.
• Whether a single valuation date, or single publication date would be achievable for all schemes.
• The potential capacity crunch which may result for administrators.
• The relationship between a statement season and the introduction of the pensions dashboard.

PASA Chair Kim Gubler commented: “Benefit statements are high on the industry agenda and rightly so; the range and complexity of what has historically been provided to members is not working. The Pensions Minister is keen to standardise and simplify what’s provided to members and PASA fully supports this move. The proposed changes, as outlined in the DWP’s recent consultation, have far-reaching consequences for pension administrators, and the formation of our Benefit Statements Working Group is in direct response to this.” 

 

 

Living longer: impact of working from home on older workers

(AF3, FA2, JO5, RO4, RO8) 

The Office for national statistics has published research of the potential positive, long-term impact, that COVID could have on the UK economy. The main findings included:

1. People leaving the workforce between age 50 and State Pension Age (SPA) could wipe £88 BILLION from the economy.
2. Conversely, if the employment rate among 50 to 64-year-olds was similar to those aged 35 to 49 years, it could add 5% to GDP or £88 billion.
3. Women are much more likely to be economically inactive before state pension age than men.
1. At age 50 years, 17.9% of women were economically inactive compared with 9.6% of men.
2. At age 64 years, 58.6% of women were economically inactive compared to 44.9% of men.
4. Worryingly for them, both men and women who are economically inactive between age 50 and state pension age are less likely to report “good” or “very good” health than those who are employed or unemployed. (Linking in with the finding from the LV= research above).

The report states that the most cited reasons for people leaving the workforce prior to attaining their SPA included; health (physical or mental), commute times, care responsibilities and lack of flexibility. The report stated a greater willingness for employer to be more open to flexible working after so many working were able to maintain or boost productivity working from home, much contribute to an increase in economic activity in the 10-12 years prior to SPA with a resultant boost to the economy. 

 

BW: COVID-19 impact on life expectancy

(AF3, FA2, JO5, RO4, RO8)

Barnett Waddingham LLP (BW) has published an interactive report entitled: “FTSE350 pensions: COVID-19 and life expectancy impact”. It finds that FTSE350 companies are increasingly transferring the risks of managing their DB pension schemes to the insurance market through buy-ins, buyouts and longevity swaps.  

However, the pandemic has created additional complexity – with the outlook for future longevity being difficult to predict. Companies looking at the potential cost and timing of approaching the insurance market therefore need to consider the possible implications for life expectancies and the resulting impact on the value of pension scheme liabilities. The report’s key findings included:

• £800bn+ - Assets put aside to meet future promised pension payments.
• £100bn - UK DB pension scheme liabilities transferred to insurers during 2019 and 2020.
• 8-years and 5-months – The average time to buyout based on a positive life expectancy impact scenario.
• 5-years and 1-month – The average time to buyout based on a negative life expectancy impact scenario.

The pandemic has highlighted the need for diligent risk management; and so, this is an ideal time for trustees and sponsors to consider their management of longevity risk over the long-term. 

The effect of COVID-19 on life expectancies could have a significant impact on the journey to the endgame for DB schemes. A good journey plan, reviewed regularly, is essential to monitor progress and manage risk.

 

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