This pensions timeline highlights recent and forthcoming pensions developments and actions that these require in order to help trustees plan issues to address on their schemes.
The ‘Action’ column sets out actions that trustees need to take in relation to each development:
- some developments require immediate action;
- some will require future action in the medium term and recommend that trustees monitor the position;
- some are recently implemented changes and the action included is a reminder in case the issue still needs to be addressed; and
- some are future developments due in the longer term where no action is currently required.
If you have any questions on the information and recommendations in this table, please contact your usual OC contact or Caroline Blackwood.
|DC developments||DC Code of Practice: TPR’s new Code of Practice on DC governance and administration has come into force.
To accompany this TPR has also issued 6 ‘How-to guides’ for trustees, which are designed to help trustees implement the revised DC Code.
| Trustees of DC schemes or sections should be familiarising themselves with the new
Code and How-to guides, and considering steps required to ensure that their schemes are compliant.
|Chair’s statement: the Charges and Governance Regulations require the chair of DC occupational pension schemes to produce a statement within 7 months of the end of each scheme year, including specified information.||Many affected schemes will now be producing their first chair’s statement. Please get in touch with your usual Osborne Clarke contact if you would like advice on this. The trustees will need to confirm that they have prepared the required statement in the next scheme annual return to TPR.|
|Ban on member borne commissions: from 6 April 2016 providers of workplace DC schemes used for automatic enrolment were banned from putting in place new arrangements levying commission or other charges on scheme members to recover the cost of commission paid to advisers.
Members may still opt-in to receive advice in which case the ban will not apply.
There is expected to be a consultation later in 2016 on introducing a ban in respect of commission arrangements that existed before 6 April 2016.
|The ban applies primarily to service providers, but imposes a duty on trustees to
inform the service provider if the scheme is a qualifying scheme used for automatic enrolment. The deadline for trustees to provide this information was 5 July 2016.Trustees will be required to notify TPR via the scheme return from 2017 whether the service provider has confirmed that they are compliant with the ban.
|Risk warnings: with effect from 6 April 2016 trustees are required to give members ‘retirement risk warnings’ when the member enquires about flexible access options. This is a development from the previous position where trustees had to provide guidance in a form approved by TPR.||Trustees should ensure that communications with members who enquire about flexible access options comply with the statutory requirements.|
|Consultation on exit charges: the government consulted on pension transfers and early exit charges in 2015. It was concerned that these could be presenting barriers to members wishing to take advantage of the new retirement freedoms. In its response to the consultation the government confirmed that it will implement a legislative cap on early exit charges. The FCA will implement this for contract-based schemes by the end of March 2017 and TPR is to work alongside the FCA to implement a similar cap for occupational schemes. See our update
for further details.
|Trustees should review any early exit charges payable in their schemes.|
|Consultation on secondary market for
|The government has issued a consultation on the detail of the tax framework for the proposed secondary market which will allow people to sell their annuities in certain circumstances. See our update for further details. We expect further regulation in the next few months designed to enable the new market. It is anticipated that the secondary market for annuities will become operational in April 2017.||Trustees should monitor for further developments.|
|Pensions tax||Reduced lifetime allowance (LTA): from 6 April 2016 the LTA was reduced from £1.25m to £1m, and transitional protections were introduced for members who had accrued in excess of or were close to the former limit.||Employers and/or trustees may have communicated with affected employees about these developments. If trustees have not communicated with members already about these developments, include them in the next general member communication.|
|Tapered annual allowance (AA): this has come into effect from 6 April 2016 for the 2016/2017 tax year. It broadly affects those with gross income of £150,000 a year or more, tapering down the level of AA available from its standard level of £40,000 to a minimum level of £10,000 for those earning £210,000 or more.|
|Possible changes to pensions tax relief:the 2016 budget saw the introduction of the LISA (lifetime ISA). Other more radical changes to pensions tax, including a move to taxing contributions instead of pension income were not taken forward, but we may see more on this in the future.||Trustees should monitor
|Introduction of the LISA: this was announced in the 2016 budget and will be included in a forthcoming Lifetime Savings Bill. It is aimed at allowing individuals to save for a first home or retirement or both, by providing a government “top up” bonus of 25% on all savings up to £4,000 a year||No action currently required.|
|Brexit||Trustees and sponsoring companies are considering what implications Brexit may have for their pension schemes. The Pensions Regulator (TPR) has issued this statement.
See our update on the pensions legal implications of Brexit for further details.
|Abolition of DB contracting-out||Schemes that use fixed-rate revaluation for guaranteed minimum pensions and that are open to accrual are likely, depending on the wording of the rules, to have an issue with the timing and operation of fixed-rate revaluation after the abolition of DB contracting-out on 6 April 2016. A rule amendment is likely to be needed and a statutory modification power has been introduced allowing a change to be made retrospectively to 6 April 2016. This modification power is available until 5 April 2017.||Affected schemes that have not already made an amendment to deal with this issue
should address this pre-5 April 2017.
|VAT treatment of pension scheme services||The treatment of VAT and its recovery on services supplied to pension schemes has been the subject of a number of cases. The position remains unclear and further guidance is expected from HMRC. Until the position is settled, it is difficult for employers to decide how to proceed; currently there is a transitional period allowing the status quo to continue until the end of 2016. We await a further publication from HMRC.||Trustees should monitor the position.|
|British Steel consultation||The government is consulting on various options to help the British Steel Pension Scheme (BSPS), in the context of a likely restructuring of its principal employer. The consultation considers 4 possible options. It closed on 23 June 2016 and the government’s response is awaited.||No action is currently required. Monitor the position.|
|Automatic enrolment – cyclical
|Three years after an employer first automatically enrolled its eligible jobholders into a qualifying pension scheme, it must go through a further process to automatically enrol any eligible jobholders who are not members of the qualifying scheme, a process known as cyclical re-enrolment as it will be required every 3 years.||Affected employers must take necessary steps.|
|State pension age||A review of state pension ages is currently being carried out, and a report is due by January 2017. The government must issue a final report on the outcome of that review before 6 May 2017.||No action currently required.|
v Northern Ireland LGPS
|The Supreme Court has granted permission for an appeal in this case concerning the benefits awarded on the death of a member of the LGPS to his surviving unmarried partner. No date has yet been fixed for a hearing.|
|An appeal in this case concerning survivor’s pension benefits for same sex civil partners or spouses was dismissed by the Court of Appeal. The Court of Appeal refused permission to appeal to the Supreme Court, but we await to hear whether the parties will appeal directly to the Supreme Court. See our update for details of the Court of Appeal decision|
|This High Court case found that an income payment order could not be made against a bankrupt person’s undrawn pension. This decision was the opposite of that in another High Court case, Raithatha. It is being appealed and judgment is expected.|
|This decision about a series of deeds of amendment that were invalidly executed over 20 years is being appealed to the Court of Appeal.|
UK Holdings Ltd v Dalgliesh
|Leave to appeal the High Court judgments on breach and remedies has been granted. The appeal is expected to be heard in early 2016.|
|Another case considering the vexed question of whether the trustees have the power to switch from using RPI to CPI for revaluing deferred pensions and indexing pensions in payment. The High Court’s decision that the trustees’ could not switch is to be appealed to the Court of Appeal in 2016.|
Insurance Trustees Ltd v Sterling Insurance Group Ltd
|This case considers restrictions to amendments to a pension scheme on the basis of the wording of the scheme’s power of amendment. An appeal to the Court of Appeal is due to be heard in early 2017.|
& ors v FDR Ltd
|This case considered how the rules of a DB scheme were to be interpreted and implemented in relation to pension increases. It is due to be heard in the Court of Appeal in early 2017.|
This table is designed to be an aid to pension trustees in determining actions required in relation to recent and forthcoming legislative, caselaw and other pensions developments. The information and recommendations provided are not legal advice or scheme specific and do not necessarily cover every development that may require pension trustee consideration. Please contact your usual OC contact or Caroline Blackwood for specific queries.