Pensions update; Pensions Schemes Bill receives royal assent and more.

• Government consultation on increasing the normal minimum pension age to 57
• Pension Schemes Newsletter 127 - February 2021
• TPR releases its DC 2020 Survey Results: More schemes thinking about wind-Up
• Pensions Schemes Bill receives royal assent
• NHS Pension Scheme: Pension Flexibility - Response to consultation

 

Government consultation on increasing the normal minimum pension age to 57

(AF3, FA2, JO5, RO4, RO8)

The government has issued a consultation on implementing the increase in the normal minimum pension age (NMPA) to 57 from 6 April 2028. 

The consultation states that the government believes increasing the NMPA reflects increases in longevity and changes in expectations around how long people will remain in work and retirement.

The consultation proposes the protection of existing scheme rights. This would allow existing scheme members with a right under the scheme rules as at 11 February 2021, to a NMPA below 57, to retain that right.

As with previous protected pension ages, the proposal is that the protection would be lost on transfer unless it formed part of a block transfer. However, the government plans to remove the requirement for members to take all their benefits at the same time for those with a protected age of 55. 

The increase to age 57 will not apply to members of the firefighters, police and armed forces public service pension schemes

The consultation closes on 22 April 2021.

 

  

Pension Schemes Newsletter 127 - February 2021

(AF3, FA2, JO5, RO4, RO8)

Pension Scheme Newsletter 127  covers the following:

• managing pension schemes – practitioner registration and authorisation features.

• relief at source - Notification of residency status reports for 2021 to 2022.

• Gibraltar qualifying recognised overseas pension schemes (QROPS) – new regulations.

• pension flexibility statistics – 1 October to 31 December 2020.

Issues of particular interest

Relief at source – Residency Status

Schemes should have received their January 2021 notification of residency status reports.

If schemes did not receive a residency report they can use HMRC’s residency look up service for 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 having a ‘rest of UK’ residency status.  

Gibraltar QROPS

Following the end of the transition period, new regulations have been introduced that mean recognised transfers to a QROPS established in Gibraltar are treated in the same way as they were before the UK left the EU, i.e. transfers are not subject to the overseas transfer charge.

Pension flexibility statistics

From 1 October 2020 to 31 December 2020 HMRC processed the following number of tax repayment claim forms

• P55 = 4663
• P53Z = 2,515
• P50Z = 841

Total value repaid £25,766,055.

 

 

TPR releases its DC 2020 Survey Results: More schemes thinking about wind-Up

(AF3, FA2, JO5, RO4, RO8)

The Pensions Regulator (TPR) has released its latest, annual DC scheme governance survey which covers several interesting areas.

The survey was carried out between January and March 2020, mainly before the COVID-19 pandemic and presumably because of that, only covers 216 trust-based schemes of differing size, including 16 master trusts, compared to the 2019 survey which covered 447 schemes. 

The 2020 survey covers several topics and some of the key findings are:

• Climate change: schemes that had 100+ members and/or were used for automatic enrolment were asked a number of questions about climate change. Overall, 43% of this group had considered climate change in their investment strategies, up from 21% in 2019. Together these schemes covered 95% of DC members. This topic is what the Regulator chose to lead on in its press release accompanying the survey, noting that it is concerned that 21% of surveyed schemes felt climate change was not relevant to them and that in the spring it will publish a strategy setting out how it will help trustees meet this challenge.

• Winding up: 42% of schemes reported that they had considered winding up (compared to 19% in 2019). Large schemes were least likely to have considered this (17%). The primary reason given for considering winding up was the time and cost involved in running the scheme (31%). The main barriers to winding up were given as lack of time (20%), the decision still being under review (15%) and waiting for members to retire or leave the scheme (15%).

• Chair’s statements and scheme returns: 76% of schemes indicated that they had completed a scheme return in the previous 12 months, and 58% had provided a chair’s statement. Over a quarter (27%) of schemes that had produced a chair’s statement indicated that this had resulted in the trustees devoting more time to governance and administration. This proportion was lower for the scheme return (17%). There was little difference in reported impact of the scheme return by size of scheme. Larger schemes were more likely to state that the chair’s statement had led to increased time spent on governance and administration (56% of master trusts, 47% of large and 50% of medium vs. 18% of micro and 19% of small schemes). However, there was little difference by size of scheme when it came to reported impact of the scheme return.

• CMA duties: 45% of schemes were aware of the new CMA duties around setting objectives for providers of investment consultancy services and tendering for fiduciary management services (see Pensions Bulletin 2020/48) and 29% had read the Regulator’s guides about these.

• Cyber security: 32% of schemes had all ten of the recommended cyber security controls in place, and 78% had at least half of them – larger schemes tending to have more comprehensive measures in place than smaller schemes.

Comment

Although the Regulator chose to highlight the vital topic of climate change, the statistic that caught our eye is that the proportion of schemes that have considered winding up has more than doubled since the 2019 survey to 42%. As consolidation and wind-up has been a continuing theme of Government policy for DC schemes for more than two years now, and for more than a year before the 2020 survey was carried out, policymakers are likely to find this encouraging.

 

 

Pensions Schemes Bill receives royal assent

(AF3, FA2, JO5, RO4, RO8) 

In what the DWP refer to as a “landmark moment for UK pensions”, the Pensions Schemes Bill received Royal Assent on 11 February 2021.

The Bill, now an Act aims to strengthen protections for pension savers, introducing new civil penalties and three new criminal offences, including one with a maximum penalty of seven years in prison for bosses who raid employees pension funds for their own benefit.

The Act also paves the way for the introduction of pensions dashboards which aim to create a single platform for individuals to view all their pension pots in one place.

It also aims to ensure pension schemes help with the government’s green agenda through climate risk reporting and changes to scheme funding to improve financial sustainability.

The Act also introduces legislation to allow the creation of Collective Defined Contribution schemes.

 

 

NHS Pension Scheme: Pension Flexibility - Response to consultation

(AF3, FA2, JO5, RO4, RO8)

Way back in the summer of 2019 one of the key issues facing the NHS was thought to be its pension scheme. Senior medical staff were facing high annual allowance charges due to tapering and refusing to take additional work and even retiring early. In September 2019, the Government issued a consultation document with proposals to offer additional flexibility to the England and Wales schemes to help resolve the issue. 

The political fallout from the issue continued and led to pre 2019 election promises from all parties to resolve the issues. The Government promptly attempted this in the 2020 Budget which saw a significant increase in the tapering limits, increasing both Threshold and Adjusted Income by £90,000 to £200,000 and £240,000. This removed the vast majority for senior clinicians from the scope of tapering as well as benefiting many other high earners.

It was assumed that the proposals for additional flexibility had been dropped and the Government have now formally confirmed that is the case in their response issue on the 3 February 2021.

Therefore, flexible options such as the 50:50 option and phasing pensionable pay and receiving additional income instead of pension are not being formally adopted.

The proposals would have added considerable complexity when advising medical staff and whilst there will still be those who suffer both annual allowance and lifetime allowance charges, for most the significant increase in the tapering limits offers a better solution.