Pension Schemes Newsletter 129 - latest HMRC statistics on flexible payments from pensions

 Contents:

• FCA to require pension providers to offer to book Pension Wise appointments for customers
• Pension Schemes Newsletter 129 - April 2021
• Latest HMRC statistics on flexible payments from pensions - April 2021
• Work and Pensions Commit: Call for evidence, Pension stewardship and COP26
• TSC presses Government to ‘green’ pension provision

 

FCA to require pension providers to offer to book Pension Wise appointments for customers

(AF3, FA2, JO5, RO4, RO8)

The FCA has issued a new consultation proposing that providers will be required to offer to make Pension Wise appointments on behalf of customers before they access their pensions.

Currently, pension providers are required to signpost their policyholders to Pension Wise and encourage them to seek guidance to help them understand their options. However, take up of Pension Wise guidance has remained low and so the new proposals aim to provider a greater ‘nudge’ towards the guidance.

The FCA is proposing that when a customer has decided in principle how to access their pension savings, the rules will require pension providers to:

• refer the customer to Pension Wise guidance;

• explain the nature and purpose of Pension Wise guidance and encourage take up; and

• offer to book the customer an appointment with Pension Wise.

Providers will also be required to record whether the customer:

• declined the offer to receive the Pension Wise guidance; 

• received Pension Wise guidance; or

• received regulated advice.

The consultation closes on 29 June 2021. 

 

 

Pension Schemes Newsletter 129 - April 2021

(AF3, FA2, JO5, RO4, RO8)

Pension Scheme Newsletter 129 covers the following:

• pension flexibility statistics;

• registration statistics;

• relief at source;

• pension scheme returns;

• winding up pension schemes;

• enrolling on the Managing Pension Schemes service;

• signing in to online services;

• annual allowance calculator;

• non-taxable payments following a member’s death and Real Time Information reporting.

Issues of particular interest

Pension flexibility statistics

HMRC provide information on the number of tax repayment claim forms processed for pension flexibility payments.

From 1 January 2021 to 31 March 2021 HMRC processed:

• P55 = 4,226 forms.

• P53Z = 2,365 forms.

• P50Z = 787 forms.

Total value repaid: £23,183,421.

Registration statistics

For 2020 to 2021 HMRC received in total 1,760 applications to register new pension schemes.

Of these schemes, 66% have been registered and HMRC has currently refused registration for about 9% of applications. No decision has yet been made on the remainder.

Since 2012 to 2013 HMRC has seen an 88% decrease overall in the number of applications to register pension schemes.

Annual return of information for 2020 to 2021

The deadline for submitting the 2020 to 2021 annual return of information is 5 July 2021.

Winding up pension schemes

Only pension schemes with a status of ‘open’ will be migrated to the Managing Pension Schemes service.

If you have a pension scheme that needs to be wound up on the Pension Schemes Online service, you’ll need to report this on an event report.

Enrolling on the Managing Pension Schemes service

Ahead of migration of pension schemes on to the Managing Pension Schemes service, HMRC want to remind you that you’ll need to enrol on the Managing Pension Schemes service first, under your existing scheme administrator ID.

You can do this at any time and they would like to encourage you to do this as soon as possible. More detail of how can be found in the newsletter 129 itself and information on the migration can be found in the March 2021 newsletter.

Annual allowance calculator

The annual allowance calculator provided by HMRC has been updated for 2021/22.

Non-taxable payments following a member’s death and Real Time Information (RTI) reporting

The regulations The Pension (Non-Taxable Payments Following Death)(Real Time Information) Regulations 2021 have been made and laid.

You can find more information about these regulations in the accompanying Explanatory Memorandum and the Tax information and impact note for reporting non-taxable pension death payments using Real Time Information.

 

 

 

Latest HMRC statistics on flexible payments from pensions - April 2021

(AF3, FA2, JO5, RO4, RO8)

The latest Official Statistics on flexible pension payments show a 6% increase in the amount withdrawn from pensions flexibly, increasing from £2.5 billion in Q1 2020 to £2.6 billion in Q1 2021.

The number of individuals making withdrawals saw a significant increase of 10% over the year, up to 383,000 compared to 348,000 in the same quarter of 2020. There was also a 6% increase in the number of individuals withdrawing compared to the previous three months, which is in line with the seasonal patterns from previous years.

The average withdrawal in Q1 2021 fell 4% to £6,800, down from £7,100 in Q1 2020. The statistics have shown average withdrawal amounts consistently decreasing since reporting became mandatory in Q2 2016, usually with peaks in Q2 of every year. However, last year there has been no Q2 peak, possibly due to the impact of COVID-19.

The decrease in the average withdrawal amount suggests fewer people are paying unnecessary income tax on large withdrawals, however, advice is still essential to ensure money is taken in the most tax efficient way. 

Even where careful planning is sought, due to the way withdrawals are made under the PAYE system too much tax is often deducted at source. Where this occurs clients can make a reclaim during the tax year.

To reclaim tax within the same tax year the following forms should be used:

• P55 to reclaim an overpayment of tax when funds have been flexibly accessed but the fund has not been extinguished.

• P50Z to reclaim an overpayment of tax when funds have been flexibly accessed and the fund extinguished and the client has also ceased to work or claim benefits.

• P53Z to reclaim an overpayment of tax when funds have been flexibly accessed and the fund extinguished.

• P53 to reclaim an overpayment of tax on a trivial commutation lump sum or small pension pot taken as a lump sum.

 

 

 

Work and Pensions Commit: Call for evidence, Pension stewardship and COP26

(AF3, FA2, JO5, RO4, RO8)

Parliament’s Work and Pensions Committee (WPC) has launched an inquiry into the Government’s approach to ensuring pension schemes consider the risks posed by climate change and the role schemes can play in meeting emission reduction targets. Ahead of COP26 the WPC making a Call for Evidence on how the UK Government’s approach to pension scheme stewardship can inform - and should be informed by; approaches taken internationally.

The Committee is asking six questions and the deadline for responding is 18 June:

1. How should pension schemes contribute to setting COP26 targets and helping to achieve those targets once agreed?

1. What role should international standards have in supporting pension schemes to assess climate change risks when considering scheme investments?
2. Are there suitable financial products to enable pension funds to make climate-conscious investments, and how should such investment be facilitated and supported?

1. How should the UK seek to share and learn from international best practice?

1. What regulatory changes or other Government action has been most effective in delivering change in the UK; and what changes on the part of Governments elsewhere should the UK learn from?

1. Do pension schemes have suitable information to assess climate risk, or do there need to be international reforms to financial reporting?

Commenting on the inquiry, Chair of the WPC Stephen Timms said: “The UK’s commitment to cutting emissions to net-zero by 2050 will have far-reaching consequences for all sectors of the economy as they adapt to the need to decarbonise. Pension schemes will undoubtedly want to consider the impact climate change and the measures to cut emissions will have on their portfolios... Our inquiry will be examining how the Government can inform and be informed by international practice emerging from COP26 and how they ensure schemes consider the risks to pension funds posed by climate change and provide help for them to support emerging technology through greener investments.”

 

 

TSC presses Government to ‘green’ pension provision

(AF3, FA2, JO5, RO4, RO8)

The House of Commons Treasury Select Committee TSC has published a report entitled “Net Zero and the Future of Green Finance” as part of its decarbonisation and green finance enquiry. The report references pensions in three distinct areas.

Most notably it highlights the adverse impact that inertia among DC scheme members (with the majority staying in the scheme’s ‘default’ fund) combined with the lack of compulsion for such funds to move to “greener” alternatives can have on sustainable investment. Amongst the evidence that the Committee heard was the view that that the charge cap of 0.75% in auto-enrolment schemes is a potential barrier to offering sustainable funds as charges for nearly all ESG funds are higher as they need to be actively managed.

The Committee calls for the Government to resolve the contradiction between the Treasury’s view that default funds should not be required to move to more green alternatives, while also maintaining that consumers should not have to switch out of the default fund to invest sustainably. The Committee also suggests that the Treasury should report regularly on the proportion of pension holders in DC schemes who remain in the default fund, and the extent to which those default funds are aligned with a path to Net Zero.

In terms of DB schemes, where members have no choice as to how their assets are allocated, the Committee’s main concern is how best to get smaller schemes to acknowledge ESG concerns. These concerns are framed in the context that the Pension Schemes Act 2021 and associated regulations concentrate on mandatory climate change governance and disclosures in line with the recommendations of the Task Force on Climate-related Financial Disclosures for larger pension schemes only.

The Committee calls on the Government to set out how these smaller funds will be encouraged to integrate climate governance and reporting requirements.

Finally, the report discusses the “long-term asset fund” (LTAF) that the Chancellor announced last November, stating that it would launch within a year. The long-term nature of pensions would make such funds particularly suitable for pension scheme investment, but the Committee did hear evidence that there is talk of extending access to sophisticated segments of the retail market in addition to institutional investors, which could delay the launch. Also, the Investment Association recently announced that a regulatory consultation from the Financial Conduct Authority was required before any new fund could launch.

The Committee calls for clarity about who will have access to the LTAF when it launches and the timing of its launch.