Pensions; Pension Schemes Newsletter December, Updated PPF 7800 index and more.

• Pension Schemes Newsletter 126 - December 2020
• PPF publishes updated PPF 7800 index - December 2020
• FCA: information for consumers on transferring or switching UK pensions into international SIPPs
• Money & pensions service responds to report - Building the UK's financial wellbeing in the light of COVID-19
• TPR - Compliance and enforcement quarterly bulletin July to September 2020

 

Pension Schemes Newsletter 126 - December 2020

(AF3, FA2, JO5, RO4, RO8)

HMRC Pension Schemes Newsletter 126 covers the following:

• managing pension schemes - multiple scheme administrator IDs
• managing pension schemes - user research
• relief at source - Notification of residency status report for 2021 to 2022
• relief at source - receiving your notification of residency status report
• relief at source - if you do not receive a notification of residency status report
• relief at source - update to APSS106 updates
• pension scheme returns for 2019 to 2020
• signing into online services
• in-specie contributions
• annual allowance charge - members declaring their annual allowance charge on their Self Assessment tax return

Issues of particular interest

Relief at source – Residency Status

HRMC will provide schemes with details of the residency status of their members by January 2021 so that they can apply the correct rate of relief at source to scheme members in tax year 2021/2022.

Where schemes do not receive a residency report they can use HMRCs residency look up service to single or multiple members.

If schemes do not have a residency status for a member by the time they claim relief at source on the first contribution in the tax year they must treat the member as ‘rest of UK’.

In-specie contributions

Following the decision in the Upper Tribunal in the HMRC V Sippchoice Ltd ‘in-specie’ case HMRC are seeking to clarify the position given the confusion caused by the wording in the Pensions Taxation Manual (PTM).

HMRC have now updated the “Giving effect to cash contributions” part of PTM042100 to try and clarify what they regard as their long standing approach which may allow relief to pension contributions made pursuant to an effective contractual offset agreement. They have also amended the guidance in PTM043310 regarding asset-backed contribution arrangements.

Following the Upper Tribunal decision HMRC are continuing to review in-specie cases and consider what it means for those who’ve already claimed and received relief.

Annual allowance

HMRC would like to ask administrators to remind members who’ve exceeded their annual allowance for 2019/20, and who do not have sufficient carry forward available, to declare this on their Self Assessment tax return even if they are using scheme pays.

PPF publishes updated PPF 7800 index - December 2020

(AF3, FA2, JO5, RO4, RO8)

Since July 2007 the Pension Protection Fund has published the latest estimated funding position, on a s179 basis, for the defined benefit schemes in its eligible universe. 

December 2020 Update Highlights:

• The aggregate deficit of the 5,318 schemes in the PPF 7800 Index is estimated to have decreased over the month to £78.8 billion at the end of November 2020, from a deficit of £126.0 billion at the end of October 2020.

• The funding ratio increased from 93.3 per cent at the end of October 2020 to 95.8 per cent.

• Total assets were £1,799.2 billion and total liabilities were £1,878.0 billion.

• There were 3,216 schemes in deficit and 2,102 schemes in surplus.

• The deficit of the schemes in deficit at the end of November 2020 was £221.4 billion, down from £253.2 billion at the end of October 2020.

Funding comparisons

	November 2019	October 2020	November 2020
Aggregate funding position	-£44.4bn	-£126.0bn	-£78.8bn
Funding ratio	97.5%	93.3%	95.8%
Aggregate assets	£1,706.6bn	£1,766.3bn	£1,799.2bn
Aggregate liabilities	£1,751.0bn	£1,892.3bn	£1,878.0bn
Dataset / Assumptions	Purple 19 / A9	Purple 19 / A9	Purple 19 / A9

The PPF 7800 index is published on the second Tuesday of every month, and the PPF publishes The Purple Book each year. 

FCA: information for consumers on transferring or switching UK pensions into international SIPPs

(AF3, FA2, JO5, RO4, RO8) 

The Financial Conduct Authority (FCA) has issued a News Release explaining that it has been contacted by consumers about overseas advisory firms advising expatriates to transfer or switch their UK pensions into a SIPP — often one marketed as an “international SIPP”.

The FCA warned: “Overseas advisory firms often invest consumers’ pension funds through an offshore investment bond within an international SIPP. We are concerned that consumers who invest in this way may be exposed to high and/or unnecessary charges. We are also concerned that the tax benefits of investing through an offshore investment bond are largely redundant to someone investing in a UK personal pension scheme.”

The FCA goes on to say that: “If you are approached by an overseas advisor, you should consider if these arrangements are in your best interests. Make sure that you understand all charges that may be incurred by the overall arrangements, as well as any exit penalty charges that may apply.” The FCA also said that members of DB schemes who are considering transferring out into an international SIPP should contact The Pensions Advisory Service for impartial guidance. As can be seen from the “Dear CEO” letter (below) to SIPP operators, the FCA seems to believe that these international SIPPs encourage unnecessary charging when the SIPP invests in a non-FCA regulated offshore bond, paying high commissions to offshore advisers.

Money & pensions service responds to report - Building the UK's financial wellbeing in the light of COVID-19

(AF3, FA2, JO5, RO4, RO8)

The Money and Pensions Service (MaPS) has released its response to 13 ambitious financial wellbeing recommendations from influential sector leaders, which were published in October 2020.

Of the 13 recommendations, five were directed at MaPS, but they have responded to all 13, the 5 directed at MaPS are as follows.

1. MaPS should run a three-phased programme of awareness raising, coordinating messaging and partners through an agile approach, to reach: people at risk of overcommitting to high cost credit; young people in financial difficulty finding it harder to transition to employment/further education; and people at risk of redundancy.

Response: MaPS will refocus current campaigning activity to target the audiences highlighted by the independent Chairs (e.g. during Talk Money Week). MaPS will continue to work with employers and agencies across the UK to support people at risk of/in redundancy and consider how it can coordinate with partners a larger co-funded awareness raising effort in 2021/22 once budgets are known and secured.

2. An ‘Essential Financial Skills’ training programme should be codesigned by MaPS, with young people, and embedded in all government backed programmes for 16- to 24-year-olds that lead to jobs and careers.

Response: MaPS will build on the ‘youth checkpoints’ programme and the NESTA ‘rapid recovery challenge fund’ as existing programmes that support delivery in this area. Additionally, MaPS will explore options for delivery channels for this recommendation including closer partnership working with FE colleges and targeting pilots with large employers in the UK.

3. MaPS should develop parent/child conversation support tools to help families facing the combined challenges of money and mental health problems, drawing upon proven ‘Talk, Learn, Do’ techniques previously piloted by MaPS.

Response: MaPS commits to share and build on the evaluation data from existing pathfinder projects in Scotland, Wales, and Northern Ireland. As ‘Talk, Learn, Do’ is more firmly embedded across the UK, MaPS will be mindful of how future rollout can help households where money and mental health problems are present.

4. MaPS should create a later-life checklist for people over 50 who have been affected by the COVID crisis, especially people at risk of redundancy.

            Response: As part of ongoing work on a ‘Midlife’ MOT, MaPS will bring relevant content together as a ‘later-life checklist’ digital resource. In 2021/22, MaPS will explore appropriate channels for distributing this resource and enabling people over 50 to plan for later life amidst the COVID-19 crisis. 

5. (a) MaPS should carry out two reviews to help the debt advice sector address an expected rise in demand.

                        Response: MaPS will undertake a rapid review of lockdown and social distancing and the demand for debt advice. MaPS will complete a review of customers who are less well served by debt advice to be commenced in 2021/22.

            (b)       MaPS and Money & Mental Health Policy Institute should promote accessible debt and credit services for people with mental health problems.

                        Response: MaPs will work with MMHPI to further develop accessible debt services based on MMHPI research. MaPS will work with MMHPI to develop accessible standards for creditors.

TPR - Compliance and enforcement quarterly bulletin July to September 2020

(AF3, FA2, JO5, RO4, RO8) 

The Pensions Regulator (TPR) published their quarterly compliance and enforcement bulletin for July to September 2020. Particular points of interest within the bulletin were:

• an increase in unpaid contribution and compliance notices compared with last quarter;
• TPR’s first ever Proceeds of Crime confiscation order.

Increase in unpaid contribution notices

The bulletin shows a 191.4% increase in unpaid contribution notices (UCN) – from 352 to 1,026 – and a 17% increase in compliance notices (CN) – from 13,185 to 15,420 – compared with the previous quarter. The regulator has clearly been continuing to be tough with employers throughout the pandemic ensuring that they continue to comply with their duties. There were easements at the start of the pandemic but TPR have confirmed that they were still monitoring compliance and taking action where required.

Proceeds of Crime confiscation order

The first Proceeds of Crime confiscation order was secured in September against a fraudster who swindled a charity’s pension scheme out of more than £250,000. TPR have now also secured a second order in October for £292,000 showing that TPR are taking this type of fraud seriously and taking action where possible to recoup pension scheme assets.