PFS What's new bulletin - January I

TAXATION AND TRUSTS

 

Scotland's new Power of Attorney processing system due to go live on 28 January 2025

(AF1, RO3)

 

With several years of development and testing now fully complete, Scotland’s new Power of Attorney (POA) case management system is scheduled to go live at the Office of the Public Guardian (OPG) in Scotland on Tuesday 28 January 2025.

 

Ian Macdonald TEP, Head of the Private Client Team at Wright, Johnston & Mackenzie (WJM) stated: ‘Currently the OPG is taking ten months to process POAs submitted for registration, although thankfully there is a limited facility to expedite registrations in certain circumstances.’, before going on to say ‘Any improvement to the system is long overdue and will be warmly welcomed’.

 

The transfer period is set for Friday 24 January and Monday 27 January, during which the current system will need to be switched off and any records will be transferred. The system will be unavailable to all of the OPG’s operational teams for these two days. This time is expected to affect the level of service provided, which has already been reduced by the mandatory re-training of staff as part of this development.

 

The new system will also need some tweaks making. This includes a temporary work around for electronically submitted applications that are rejected. When this happens, the applicant will receive two separate emails, one announcing the rejection and the other stating the reasons for the rejection and how to resubmit.

 

The OPG have recognised that receiving two advisory emails is not ideal but have said that this is only temporary during the first phase of the replacement case management system. The OPG anticipate that normal service will resume in April 2025, whereby senders will receive a single explanatory email when a POA can not be registered.

 

Sarah-Jane Macdonald TEP, Vice Chair of STEP Scotland and Private Client Solicitor at WJP commented that: ‘The current system poses a number of problems, particularly where the adult’s capacity is declining quickly and where a rejection may result in documents needing re-signing. Even requests to expedite applications are taking much longer than historically, causing issues for time-critical decisions.’

 

She added: ‘It is understood that all existing records are being moved to the new system; however, it is unclear whether the outstanding applications will benefit from the improved system to allow the OPG to work through the significant backlog’ then going on to say ‘Any new efficiencies that the OPG can adopt to process the data will hopefully allow staff to deal with enquiries and expedite requests more swiftly, creating a better experience for all involved.’

 

Following on from the introduction of the new POA processing system, the OPG will be prioritising work on guardianship orders, intervention orders and the access to funds scheme as part of their digital transformation project, throughout 2025 and 2026.

 

INVESTMENT PLANNING

 

Latest property statistics

(AF1, RO3)

 

The latest UK property statistics provide residential and non-residential transactions estimates during the previous three years.

 

The provisional seasonally adjusted estimate of the number of UK residential transactions in November 2024 is 92,640, 13% higher than November 2023 and 8% lower than October 2024. The provisional non-seasonally adjusted number of UK residential transactions in November 2024 is 104,440, 19% higher than November 2023 and 6% lower than October 2024.

 

Non-seasonally adjusted and seasonally adjusted UK residential property transactions by month between November 2021 and November 2024:

 

 

The figures above show that:

 

• October 2024 saw an increase in both residential and non-residential transactions in the month of the Autumn Budget. In November, residential transactions fell back to their previous levels.

 

• October 2024 saw the highest monthly seasonally adjusted figures since these statistics began in April 2005. The large decrease in transactions in November 2024 could indicate that transactions were brought forward into October 2024.

 

2024 inflation numbers (AF4, FA7, LP2, RO2)

 

CPI inflation, which fell again in 2024, helped by a sharp drop in the rate of food price increases

 

Source:ONS

 

The CPI annual inflation reading for December 2024 was 2.5%, 1.5% below the 4.0% of December 2023 and 8.6% distant from the peak of 11.1% in October 2022. The further fall was driven by a broad disinflation, but there were several areas where annual inflation increased. The graph above shows how much each of the twelve Office for National Statistics (ONS) categories contributed to CPI inflation in 2023 and 2024, a calculation that takes account of both the category’s inflation rate and its weighting in CPI.

 

A closer look at the inflation data throws up the following highlights:

 

• Food and Non-alcoholic Drink price inflation was 8.0% in 2023, but just 2.0% in 2024. That drop was the largest single contributor to the fall in annual inflation, worth about half the total decline. The public perception of food price inflation is somewhat different, not least because cumulatively over the last three years it amounts to 28.7% (equivalent to 8.8% a year).

 

• A major contributor to the decline in 2023 inflation was Housing, Water, Electricity, Gas and Other Fuels, which fell by 3.4%. However, that reversed in 2024 to an increase of 3.1%. The change falls into the statistical oddity category. In 2023 the electricity, gas and other fuels sub-category recorded a 21.5% decline. In 2024, the decline continued, but at the much lower rate of 6.8%. As a result, the other components of the division, notably the largest of rents (+7.6%) had more impact.
• The category that made the largest contribution to inflation in both 2023 and 2024 was Restaurants and Hotels. This reflects the two components mentioned above. The category has the largest (14.5%) weighting in the CPI (restaurants and cafes alone are 11.2%) and 2024 inflation of 3.4% (down from 7.0% in 2023). The inflation outlook for this category is not great for 2025 as it faces headwinds from the National Insurance contributions (NICs) increase, higher minimum wage and the reduction of business rates relief for the hospitality sector in England.

 

• CPIH inflation (Consumer Prices Index including owner occupiers’ housing costs) tells a different story from the CPI. CPIH continues to be the headline figure on ONS inflation reports and used to be a measure the (previous) Government favoured, even if it never grabbed public attention.

 

CPIH inflation was 4.2% in 2023, but fell only 0.7% to 3.5% in 2024. Ironically it now matches the old RPI, an index which CPIH is due to replace in 2030. The main difference between CPIH and CPI is, unsurprisingly the H, which is measured as OOH (owner occupiers’ housing costs). OOH has a 16.5% weighting in the CPIH, which effectively reduces by a sixth the weighting of all the CPI components in the CPIH. OOH annual inflation was 8.0% in 2024, against 5.3% in 2023. The longer term impact of OOH is clear from the graph below:

 

 

Comment

 

OOH might be another reason why there is so much public scepticism about the true rate of inflation. Despite the name, it is based on rental equivalence, i.e. the rent that would be paid for an equivalent house is used as a proxy for an owner-occupier’s housing costs. Thus, it is more affected by rental moves than house prices - and UK private rents rose by 9.0% in 2024, according to the ONS.

PENSIONS

 

HMRC Pension Scheme Newsletter 166 – January 2025

(AF8, FA2, JO5, RO4)

 

Pension scheme newsletter 166 covers the following:

 

• Inheritance tax on pensions consultation
• tax codes for pensions
• pension scheme return
• relief at source
• lifetime allowance protections and enhancements
• low earners anomaly
• public service pensions remedy
• pension flexibility statistics

 

Areas of particular interest:

 

Inheritance tax on pensions consultation

 

The consultation closed on 22 January 2025.  HRMC are now reviewing the issues raised and state that they will publish a formal response and draft legislation later this year. 

 

Tax Codes for pensions – helping customers get the right pension faster

 

From April 2025, HMRC are aiming to improve how tax code information is used for those starting to take their pensions and so pay the right amount of tax from the outset. HMRC state they will automatically update the tax code for individuals who are on a temporary tax code and would benefit from being on a cumulative code.  In theory this means they’ll avoid an overpayment or underpayment at the end of the year.

 

There will be no need to contact HMRC and once a tax code has been changed they will inform customers by letter or digitally if they’ve signed up for paperless in the HMRC app or online.

 

Lifetime allowance protections and enhancements

 

HMRC want to remind everyone that due to the abolition of the lifetime allowance (LTA), deadlines have been applied to certain LTA protections. 

The deadline for applying for the following is 5 April 2025:

 

• Fixed Protection 2016,
• Individual Protection 2016,
• International enhancements,
• Pension Credit enhancements.

 

Low earners anomaly – payment update

 

HMRC report that the government remains committed to this policy.  The predict it will see approximately £1 million individuals in net pay schemes offered an annual payment of around £70.

 

The government will legislate to provide that the top-up payment will not impact benefit entitlement or national insurance

 

Top-up payments for individuals will be made for the 2024/25 tax year and subsequent years, but the payments for 2024/25 are likely to be offered later than planned — HMRC don’t expect this to be until 2026.

 

Public Service Pensions – delayed pensions savings statements

 

Due to the McCloud remedy some public service pension schemes have not yet issued pension savings statements (PSS) for the tax year 2023/24 and will not do so in time for the self-assessment (SA) deadline of 31 January 2025.

 

Members in this situation should complete their SA return as normal, using a provisional figure. This provisional figure should be calculated to the best of their ability and there will not be a penalty if the figure is incorrect.

 

If a member submits their tax return with a provisional figure by the 31 January 2025 deadline then they will not receive a late filing penalty.

 

When members receive their PSS, they should update their return with the actual figure — this needs to be done within a year of 31 January 2025 deadline.

 

If a member believes they have not breached the annual allowance, they may decide not submit an SA return by the 31 January 2025 deadline. When they receive their delayed PSS for 2023/24, if it shows they do have an annual allowance charge, they may be charged an automatic penalty. If so, members will need to appeal the penalty and HMRC will accept the delay in issuing the 2023/24 pension savings statements represents a reasonable excuse.      

 

Note that the inflation offset used in calculating pension inputs for 2023/24 is 10.1%.  In addition, any negative inputs in a final salary section of a public service scheme can now offset the positive inputs in the career average scheme.  These factors are significant and should be considered when making any estimates.

 

Pension Flexibility Statistics

 

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

 

From 1 October 2024 to 31 December 2024, HMRC processed:

 

• P55 — 8,523 forms
• P53Z — 4,760 forms
• P50Z — 1,329 forms

 

Total value of repaid tax: £49,514,458.

High Court Decision: Major v Chief Constable of Essex Police

(AF8, FA2, JO5, RO4)

 

In Major v Chief Constable of Essex Police [2024] EWHC 3290 (Admin), the High Court has held that multiple referrals for ill-health early retirement are possible. The claimant, who was a member of the Police Pension Scheme, challenged (on five grounds) the decision of the Chief Constable to refuse his application for ill-health retirement, and the connected statement that this decision was “not subject to regulatory appeal”.

 

Background to the case

 

This case arose from a judicial review brought by Christopher Major, a serving police officer and a member of the Chief Constable of Essex Police's pension scheme. Major challenged the Chief Constable’s decision to deny his application for ill-health retirement and the assertion that this decision was "not subject to regulatory appeal." The decision had been based on the evaluation of Dr. Cheng, a Selected Medical Practitioner (SMP), under the Police Pensions Regulations 2015 ("the 2015 Regulations").

 

Major argued that his psychiatric conditions, including Post-Traumatic Stress Disorder (PTSD) and recurrent depression, rendered him permanently medically unfit for police duties. He sought judicial review on five grounds, focusing particularly on the appealability of the SMP's decision and the interpretation of the statutory scheme.

 

Some of the key points to note in the judgement include:

 

1. Ground 2: Right of Appeal

 

• The High Court determined that Major was entitled to appeal the SMP's 2023 decision.
• The court found that the documents produced by Dr. Cheng constituted a "fresh report" under the 2015 Regulations. This fresh report triggered appeal rights to the Police Medical Appeal Board (PMAB).
• Dr. Cheng's 2023 evaluation included new material and diagnoses not present in his earlier 2019 report, such as alcohol dependence. This demonstrated a material difference requiring a fresh decision.
• The court rejected the Chief Constable’s argument that the SMP’s findings in 2023 did not warrant a new report. The judgment clarified that the issuance of a "fresh report" under Schedule 1, Paragraph 3(4) of the Regulations was necessary for Major to exercise his appeal rights.

 

1. Ground 1: Nature of the SMP’s Decision
• Major contended that the 2023 evaluation was not a reconsideration of the 2019 decision but a fresh referral for ill-health retirement under the statutory scheme.
• The court acknowledged that the statutory framework allows for fresh referrals where circumstances change, such as the emergence of new evidence or conditions. However, it concluded that the 2023 referral was treated as a reconsideration and not a fresh referral.
• As the referral was not classified as "fresh," Major's automatic right of appeal under Paragraph 2(1) of the 2015 Regulations was not applicable. However, the court’s finding on Ground 2 provided him with an alternative route to appeal.

 

1. Other Grounds (3-5)
• Grounds 3-5, addressing the medical and procedural aspects of Dr. Cheng’s assessment, were not determined by the court as it was unnecessary for the disposition of the case. These matters may still be relevant in an appeal before the PMAB.

 

Some of the main legal interpretations from the case include:

 

1. Statutory Framework and Reports

 

• The 2015 Regulations require SMPs to decide specific questions relating to a police officer's medical fitness and whether it is likely to be permanent. These decisions must be recorded in a report, which forms the basis for appeals and reconsiderations.
• The High Court clarified that a report must identify the medical conditions underlying the unfitness determination. If new conditions are introduced in subsequent evaluations, a fresh report is required.

 

1. Appeals and Reconsiderations
• Under Schedule 1, Paragraph 3 of the 2015 Regulations, an SMP’s decision can be reconsidered upon mutual agreement between the pension authority and the officer. However, fresh reports arising from such reconsiderations can still trigger appeal rights if new substantive findings are made.
• The court emphasised that the regulatory scheme allows for fresh referrals where appropriate, especially if new or materially different medical conditions emerge over time.

 

Implications of the Decision

 

• For Christopher Major:
• Major’s application for judicial review succeeded on the basis of Ground 2. The court issued a declaration that a fresh report from Dr. Cheng was required, incorporating all relevant findings, including alcohol dependence. Major would then have the right to appeal this report to the PMAB.
• On Ground 1, the court upheld the Chief Constable’s treatment of the 2023 evaluation as a reconsideration rather than a fresh referral, limiting its immediate impact on Major's case.

 

• For Police Pensions and Administrative Law:
• The judgment clarifies the circumstances under which SMP decisions can be revisited and the procedural requirements for fresh reports and appeals under the 2015 Regulations.
• It reinforces the principle that police officers’ medical unfitness evaluations are time-sensitive and may evolve based on new evidence or conditions.
• The decision underscores the importance of procedural fairness and the need for clarity in medical evaluations and administrative processes.

 

Conclusion

 

The High Court’s decision in this case provides a nuanced interpretation of the Police Pensions Regulations 2015. By affirming Major’s right to appeal the SMP’s findings and clarifying the distinction between reconsiderations and fresh referrals, the judgment ensures greater procedural safeguards for officers seeking ill-health retirement. While the decision addressed only part of Major’s claims, it sets a significant precedent for future cases involving police pension disputes and medical evaluations.

 

 

PLSA responds to WPC’s inquiry on pensioner poverty

(AF8, FA2, JO5, RO4)

 

The Pensions and Lifetime Savings Association (PLSA) has published its response to the Work and Pensions Committee's Pensioner Poverty: challenges and mitigations inquiry. The PLSA identifies pensioner poverty as a persistent issue, with approximately 1.9 million pensioners (16%) living in relative poverty. This is defined as incomes below 60% of the contemporary median after housing costs. The current poverty threshold is £9,880 annually for a single person and £17,004 for a couple, which is significantly below the PLSA’s Minimum Retirement Living Standard of £14,400 and £22,400, respectively.

 

Key Drivers of Pensioner Poverty

 

Several factors contribute to pensioner poverty in the UK:

 

1. Inadequate State Pension:

 

• Many pensioners receive less than the full New State Pension due to incomplete National Insurance records. Around half of retirees since 2016 do not qualify for the full amount.
• The Basic State Pension (pre-2016 retirees) is £2,688 lower annually than the New State Pension.

 

1. Low Uptake of Means-Tested Benefits:

 

• Benefits like Pension Credit and Housing Benefit are not accessed by many eligible pensioners. About 1.4 million individuals miss out on Pension Credit, averaging £4,083 annually per claimant.
• Barriers include lack of awareness, social stigma, and eligibility thresholds.

 

1. Demographic Disparities:

 

• Women: Gender inequalities in work patterns and pay contribute to a significant pensions gap. Many women fail to meet automatic enrolment criteria or work in lower-paid, part-time roles.
• Disabled Individuals: High poverty rates (31%) among disabled individuals are linked to reduced work opportunities and lower pension contributions.
• Ethnic Minorities: Employment and pay disparities result in higher poverty rates among Asian/Asian British (25%) and Black/Black British pensioners (26%) compared to White pensioners (16%).

 

1. Housing Inequality:

 

• Declining homeownership rates exacerbate financial vulnerability. Private renters face higher poverty rates (38%) than social renters (34%) and homeowners (12%).
• Future generations may struggle further as homeownership rates among younger workers decline.

 

1. Insecure Work Patterns:

 

• Gig economy workers and self-employed individuals often miss out on automatic enrolment, leaving them under-pensioned. Currently, fewer than 20% of self-employed workers save into a pension.

 

Recommendations to Address Pensioner Poverty

 

The PLSA proposes several measures to combat pensioner poverty:

 

1. Strengthening the State Pension:

 

• Maintain the Triple Lock mechanism to ensure the State Pension keeps pace with inflation and wage growth.
• Review eligibility criteria to expand access to the full New State Pension.

 

1. Improving Benefit Uptake:

 

• Enhance awareness campaigns to boost Pension Credit and Housing Benefit uptake.
• Integrate benefit systems to streamline transitions between working-age and pensioner support schemes.

 

1. Expanding Pension Coverage:

 

• Lower the earnings trigger for automatic enrolment and include gig economy workers.
• Gradually increase workplace pension contributions from the current 8% to 12%, with employers contributing a larger share.

 

1. Targeting Under-Pensioned Groups:

 

• Introduce tailored measures for women, ethnic minorities, and carers to address systemic inequalities in pension savings.
• Support disabled individuals with inclusive work opportunities and savings initiatives.

 

 

1. Engaging Employers and Industry:

 

• Promote tools and resources to help individuals engage with their pensions.
• Encourage employers to provide better support and higher contributions for workplace pensions.

 

Conclusion

 

The PLSA emphasises the need for a multi-faceted approach to reduce pensioner poverty, combining robust state support, enhanced workplace pension schemes, and targeted interventions for vulnerable groups. By implementing these measures, the UK can ensure a more equitable and financially secure retirement for all.

 

 

TPR: Automatic enrolment declaration of compliance report

(AF8, FA2, JO5, RO4)

 

The Pensions Regulator (TPR) has published its latest  Automatic enrolment declaration of compliance report covering the period from July 2012 to the end of December 2024. The report highlights trends in employer compliance and workplace pension participation. Some of the key points include:

 

1. Employer Compliance

 

• Since the introduction of automatic enrolment in July 2012, 2,493,893 employers have confirmed compliance by completing their declarations.
• Employers must declare compliance within five months of their duties' start date, meaning some newer employers may not yet be included in this report.

 

1. Workplace Pension Membership

 

• During this period, 11,193,000 eligible jobholders were automatically enrolled into workplace pension schemes.
• The total worker population affected by compliance stood at 35,257,000 as of December 2024.

 

1. Re-Enrolment Activity

 

• From April 2016, employers have been required to re-enrol eligible staff every three years.
• By December 2024, 1,422,161 employers had confirmed re-enrolment compliance, covering 32,840,000 workers.
• Among these, 1,041,000 eligible jobholders were automatically re-enrolled into pension schemes.

 

1. Pension Scheme Participation

 

• Many eligible jobholders were already members of qualifying schemes, with 22,581,000 workers actively participating at the time of re-enrolment.
• Defined benefit and hybrid scheme transitional arrangements applied to 232,000 workers during re-enrolment periods.

 

 

Analysis and Implications

Automatic enrolment continues to expand workplace pension coverage significantly, engaging millions of workers in retirement savings. The data demonstrates the scale of employer compliance and re-enrolment activities, which have sustained high participation levels. TPR’s monitoring supports these efforts, ensuring that workplace pensions remain a robust mechanism for long-term financial security.

 

This latest report underscores the success of automatic enrolment in embedding a savings culture across the UK while highlighting the ongoing responsibilities of employers to comply with re-enrolment and declaration duties.