Industry News

Transfer of ‘small pension pots’

December 2011

Pensions Minister Steve Webb (speaking at the Personal Financial Society in Birmingham) has suggested that pension savings could be automatically made to follow employees from job to job in a bid to address the problem of small pots being accrued.

An automatic transfer system that moves employees assets with them is one of he options that will be considered in a consultation on small pots to be launched by the DWP in the coming year.

Webb is set to consult on this and less radical options, which include making the existing transfer process more straightforward.

Webb expressed concern that the onus was on the individual to instigate any pension transfer, and with some schemes imposing minimums or requiring financial advice before transfers would be accepted, simply creates barriers for an individual seeking to manage their retirement plans.

Around 50,000 small pots are created each year, which is likely to increase to nearer 200,000 per year once auto enrolment is introduced.

28th November 2011 ‐ Auto‐enrolment will be delayed for small businesses

November 2011

Speaking in parliament, Pension’s Minister Steve Webb said auto‐enrolment for small businesses would not go ahead until after the end of this parliament.

'Auto‐enrolment will not go ahead for small businesses until the start of the next parliament,' he said. 'However this still means more than half of employers will be enrolled before the next parliament.'

This means the government will extend the deadline by a year for firms with fewer then 50 staff, from 1 August 2014 to 2015.

3rd November 2011 ‐ The Pensions Bill has today received Royal Assent.

Starting from October 2012 employers will begin to automatically enrol eligible workers into a qualifying pension scheme and contribute to that pension. People who are automatically enrolled will also contribute to the scheme and get tax relief.

Measures such as allowing companies to defer automatic enrolment for up to three months, simplifying the scheme certification process, and greater flexibility on choosing the automatic re‐enrolment dates will reduce red tape and cut costs.

Europe to encourage wide‐ranging pension reforms

IPE.com reports that, according to a leaked draft White Paper, the European Commission will encourage member states to implement wide‐ranging pension reforms and seek to extend the working life of employees by urging, where they still exist, the abolition of mandatory retirement ages.

It is reports that the draft says: "The primary responsibility for the design of their pension systems remains with the member states. This White Paper respects the responsibilities of the member states and proposes different types of initiatives, ranging from legislation over financial incentive to policy coordination and monitoring in an integrated and comprehensive way.

At a EIOPA conference in Frankfurt, Bernhard Wiesner (the senior vice‐president of corporate pensions at Bosch Group and representative of EIOPA's Occupational Pensions Stockholder Group) said occupational pensions should be a part of the 'first pillar', as some member states can no longer afford to support less efficient options for workers.

For 'second pillar' pensions, the Commission will develop a code of good practice for occupational pension schemes, addressing issues such as the payout phase, risk‐sharing and mitigation, cost‐effectiveness, shock absorption and ways of avoiding pro‐cyclicality in investments.

Baroness Drake says the ban on transfers into Nest will benefit the pensions industry at the expense of employees in the scheme.

October 2011

Under the current rules, people who are auto‐enrolled into a pension and go into Nest will not be able to move existing pots into the scheme.

Giving evidence to the Work and Pensions select committee today, Baroness Drake said this inability to move pots into Nest has come as a result of lobbying from the industry.

She said: “I have real concerns that some arrangements have been allowed as a result of responses to various representations that do not serve the employee well. One is the ban on transfers into Nest. I cannot see any gain for the employee on transfers into Nest. It cannot support the employee it can only support the industry.”

Baroness Drake was a member of the Turner Commission, which came up with proposals for auto‐enrolment and for a national saving scheme which later became Nest.

ATP to take on NEST with launch of master trust scheme

September 2011

Danish public pension firm ATP has announced the official launch of its independent multi employer trust 'NOW Pensions'. The scheme has been set up as an alternative to NEST in order for employers to fulfil their auto‐enrolment obligations.

NOW Pensions will be available in early 2012. The scheme aims to use ATP Group's investment expertise and experience to offer low costs and stable, long term returns.

UK retirement age could reach 67 by 2026

Steve Webb, the Pensions Minister, has indicated that the state pension age could be raised to 67 as early as 2026 because of increasing longevity.

He told the Observer that the coalition government would revise the previous Labour government timetable, under which SPA was to be increased to 67 in 2036 and 68 by 2046. Webb said the existing timetable for was too slow and savings from increasing the retirement age to 67 by 2036 would be wiped out by predicted increases in longevity.

Pensions Bill delayed by a month

The report stage and third reading of the Pensions Bill have been put back by a month to 18 October 2011. The report stage will now take place when the Commons returns from conference recess.

NEST: employer terms & conditions and online tool announced

August 2011

The National Employment Savings Trust (NEST) has published the terms and conditions for employers that intend to use NEST to meet auto‐enrolment duties under the workplace pension reforms. Formal terms and conditions for participating employers are available and a NEST employer admission agreement.

NEST has also announced that it will soon be launching an online tool for advisers to enable them to manage employers' schemes on their behalf. The way the online administration has been set up means that an employer can give an IFA access to their account and allow the adviser to administer the account on their behalf. See ‐

http://www.nestpensions.org.uk/schemeweb/NestWeb/includes/public/docs/employer‐terms‐and‐conditions,PDF.pdf

HMRC Guidance: How to wind up a pension scheme

HMRC has published new guidance relating to pension scheme wind up. If a pension scheme completed winding up before 6 April 2006 then form PSS199 should be printed off from www.hmrc.gov.uk. The completed form should be sent to the return address on the form. If a pension scheme completed winding up on 6 April 2006 or later an Event Report should be submitted online by following the flow chart in the guidance. See ‐

http://www.hmrc.gov.uk/pensionschemes/windup‐pens‐scheme.pdf

July

Treasury in talks over possible abolition of higher rate tax relief

The Telegraph reports that the Chancellor, George Osborne, is in talks to scrap higher rate tax reliefs for pension contributions. Such a move could save the Treasury £7 billion.

It is reported that discussions have begun on limiting tax relief paid out on pension contributions from those paying higher rates of 40% and 50%. The money the government would save could fund an increase in the basic state pension or be used to cut the deficit.

If the abolition of higher and additional rate relief was just a first step in a plan to completely abolish tax relief on pension contributions (give that there will be an element of compulsion from next year) the saving for the government could be as much as £22 billion a year.

Pensions Bill

The second reading of the Pensions Bill has taken place with most of the debate focussing on the timetable for increasing State Pension Age. Iain Duncan Smith, the Secretary of State for Work and Pensions, says that the government will press ahead with plans to raise the state pension age for women, but has promised to look at transitional arrangements.

The debate also covered changes to the automatic enrolment earnings threshold and the three month waiting period, but its generally considered that neither are likely to change.

Automatic enrolment: checklist for trustees published

June 2011

The Pensions Regulator has published a checklist that provides trustees with an overview of what they might need to do to ensure their scheme is ready to be used for automatic enrolment.

From next year, the UK's largest employers will have to enrol all eligible jobholders into a pension scheme, with medium and small employers following in 2013 and beyond. Eventually, automatic enrolment will affect all UK employers.

Whilst the new duties predominately apply to employers, trustees will have a role to play.

The checklist for trustees follows the regulator's educational materials aimed at larger employers and their advisers, which includes detailed guidance, a five-page summary of the new duties and an action checklist.

The trustee checklist, and further information on workplace pensions reform is available on the regulator's website.  

Fuel Rates

June 2011

HM Revenue and Customs (HMRC) has announced a change to advisory fuel rates, applicable only to company cars.

All the petrol rates have increased, ranging now from 15p for an engine size of 1,400 cubic centimetres (cc) or less and 26p for over 2,000 cc, while diesel rates are now between 12-18p.

The rates for diesel cars up to 1,600 cc have increased to 12p while the rates for 1,601 to 2,000 cc are now at 15p.
The new rates will apply to all journeys on or after 1 June 2011. For one month from the date of change, employers may use either the previous or new current rates, as they choose.

Employers may therefore make or require supplementary payments if they so wish but are under no obligation to do either.

The rates will now be reviewed four times a year. Any changes will take effect at the beginning of each calendar quarter, on 1 March, 1 June, 1 September and 1 December, and will be published on the HMRC website shortly before the date of change.

Employers should make themselves aware of any changes by referring to the HMRC website.

 

Auto-Enrolment

May 2011

This week a letter will be issued by the Chief Executive of The Pensions Regulator to the Heads of the UK’s largest Employers outlining their responsibilities for auto-enrolment over the next 18 months.

This is the first part of a massive education and compliance campaign run by the regulator as part of its enforcement role. Included with the letter will be an auto-enrolment factsheet and a five-point checklist to ease the introduction.

The companies receiving a letter are the largest employers in the UK with 120,000 employees or more, and the regulator said that in the next 6 months, nearly 600 of the largest organisations (employing a total of around 10 million individuals) will be contacted and set on the path towards their particular company auto-enrolment date.

Every UK employer will receive at least 2 letters as they approach their duty date.

Chris Poole, Head of Employee Benefits at Cobens said “ Although auto enrolment may seem a long way off, many companies plan their finances some way ahead, and given that auto-enrolment may impact some companies in a massive way it seems appropriate to have as much notice as possible to fully prepare for the changes.’’

Pensions Tax Relief Changes from 6 April 2011 Personal Pension Plans

30th March 2011

Personal/Stakeholder Pension Plans

HM Treasury has announced changes that are to be made regarding tax relief for pension scheme contributions and benefits.

Annual allowance

• The annual allowance is the amount that can be paid into all pensions for the individual with full tax relief.
• The annual allowance includes all contributions paid by the individual and the employer.
• The annual allowance for all individuals will be reduced from £255,000 to £50,000 from 6 April 2011.
• The annual allowance will be fixed at £50,000 for at least five years.
• There will be no exemption for payments occurring due to redundancy.
• From 6 April 2011 an individual will be able to carry forward unused contributions from the previous three years. The carry forward will apply a maximum contribution of £50,000 for each of the three preceding years even though the annual allowance had previously been higher.

Lifetime allowance

• The lifetime allowance is the total amount of pension savings which an individual can accrue during their lifetime.
• he lifetime allowance will be reduced from £1.8million to £1.5million from 6 April 2012.

• The government will consult on how to protect individuals who have already accrued pension values in excess of £1.5million.

Comment

The changes are a practical method for over-turning the very complicated regulations introduced in 2009 to cap tax relief for those with income of over £130,000. The new annual allowance gives each individual a clear cap on pension contributions with full tax relief. The government estimates that 100,000 people in the UK will be affected by the change in the annual allowance.