Developments in Employee Benefits law and practice

05 February 2019

FCA issues Retirement Outcomes Review Policy Statement 

The Financial Conduct Authority (FCA) has published Policy Statement 19/1 ‘Retirement Outcomes Review: feedback on CP18/17 and our final rules and guidance’ (PS19/1) and Consultation Paper 19/5 ‘Retirement Outcomes Review: Investment pathways and other proposed changes to our rules and guidance’ (CP19/5). The closing date for responses to CP19/5 is 5 April 2019.

PS19/1 outlines the new rules and guidance on the FCA’s first package of remedies from the Retirement Outcomes Review (ROR) following CP18/17. Detailed changes to the FCA Handbook are set out in the Conduct of Business Sourcebook (Retirement Outcomes Review) Instrument 2019. The new rules and guidance cover:

  • information which is sent to consumers before they decide how to access their pension savings, including ‘wake-up’ packs, ‘wake-up’ pack reminders, and additional retirement risk warnings
  • information provided to consumers about annuities and eligibility for enhanced annuities
  • changes to make the cost of drawdown products clearer and more comparable

PS19/1 also sets out the FCA’s response to feedback received on CP18/17.

CP19/5 sets out the FCA’s second proposed package of remedies from the ROR. It covers proposals to require:

  • drawdown providers to offer non-advised consumers a range of investment solutions—with carefully designed choice options—to help consumers choose investments that broadly meet their objectives. These are described as ‘investment pathways’
  • drawdown providers to ensure that consumers invest in cash only if they make an active decision to do so. The FCA proposes that these providers must also give consumers warnings about the likely impact of investing in cash on their long-term income, both when they enter drawdown (or transfer funds already in drawdown into a new product) and on an ongoing basis
  • firms to tell customers beginning to draw on their pension how much they had actually paid in charges over the previous year, in pounds and pence and inclusive of transaction costs

Spring Statement date announced

The Chancellor of the Exchequer, Philip Hammond, has announced that the government will publish its next Spring Statement on Wednesday 13 March 2019.

FRC to amend FRS 102 

The Financial Reporting Council (FRC) is consulting on changes to FRS 102 to improve the accounting regime for defined benefit pensions, as well as amendments to FRS 101 to take into account IFRS 17 Insurance Contracts.
The FRC exposure draft, FRED 71 Draft amendments to FRS 102 – Multi-employer defined benefit plans, proposes new requirements in FRS 102 for presenting the impact of transition from defined contribution accounting to defined benefit accounting for affected pensions. 

Latest Pension Scheme Newsletter confirms HMRC considering impact on tax rules of GMP equalisation 

Pension schemes newsletter 106 has been published and contains articles on the following. 

  • Pension flexibility statistics 
  • Lifetime allowance for 2019 to 2020 
  • Reporting non-taxable death benefits 
  • Changes to HMRC email addresses 
  • Guaranteed Minimum Pension (GMP) 
  • Relief at source – January 2019 notification of residency status reports 
  • Relief at source – annual return of information declaration 
  • Change of name for the Manage and Register Pension Schemes service 
  • Master Trusts

On GMP equalisation, the newsletter states –
Following the recent High Court of Justice ruling (Lloyds Banking Group Pensions Trust Limited: HC-2017-001399) there is increased interest in the equalisation of GMP benefits arising in respect of contracted-out schemes. We’re considering the pension tax issues arising and we’ll give more information and advice on this through our pension schemes newsletters in the coming months.

TPR publishes latest DC trust research

The ninth edition of the Pension Regulator’s defined contribution (DC) trust publication provides a high-level snapshot of the current landscape of occupational DC trust-based pension provision in the UK, including information on the number and membership of schemes, as well as details on DC memberships of hybrid dual-section schemes.
This year's edition covers around 31,910 current schemes from the pension schemes register, with an effective date of 31 December 2018, of which 2,010 have 12 or more members.

Pensions Wise evaluation published

‘Pension Wise service evaluation 2017 to 2018: customer experiences and outcomes’ presents findings from a quantitative evaluation of the Pension Wise service in the financial year 2017 to 2018.

On 1 February 2019, a revised version of report was issued. Changes have been made to:

  • The executive summary – the percentage of customers satisfied with the Pension Wise guidance specialist’s knowledge rounds to 94%, and the percentage of customers satisfied with the waiting time on the day rounds to 92%, 
  • Section 4.2 and Figure 4.2 – amended to 3 months rather than one month, 
  • Section 5.1 – the percentage of appointment bookers citing pension providers as somewhere where they heard about Pension Wise is 53%, matching Figure 5.3, 
  • Section 7.1 – the first paragraph has changed emphasis to show the percentage of customers that have either withdrawn or made arrangements to withdraw money from at least one of their defined contribution pensions (50%), and the percentage of non-users taking an adjustable income is 30%, matching Figure 7.1, 
  • Section 7.4 – the proportion of 2016/17 customers saying that Pension Wise helped a great deal is 45% and 
  • Section 8.4 – among customers who have not taken any relevant actions, the proportion who are too busy is 41% and the proportion who want to talk to their pension provider first is 18%.

Brexit update

Further votes on Theresa May's Brexit plan took place on 29 January. MPs voted in favour of a cross-party amendment which added to the motion that Parliament “rejects the United Kingdom leaving the European Union without a Withdrawal Agreement and a Framework for the Future Relationship”. However, this is a non-binding expression of Parliament’s view.

An amendment was passed that requires the backstop to be replaced with “alternative arrangements to avoid a hard border” but which otherwise supports the Prime Minister’s deal. 

The PM is now attempting further negotiations with the EU.

UK pension tax reliefs

The UK’s tax relief bill increased to a record £164bn in 2018-19.

Tax Expenditures  2013-14  2014-15  2015-16  2016-17 2017-18   2018-19
Income tax relief for:
Registered pension schemes  19,700  18,300  21,500  23,500  24,300  25,600
Employer contributions to registered pension schemes  13,800  13,700  15,800  16,200  17,400  18,100

The biggest single tax reliefs are zero/reduced VAT rates on the likes of food and energy (£53bn), followed by the capital gains tax exemption for main properties (£27bn) and pensions income tax relief (£25.6bn and £ including employer contributions).


John W. Wilson LLB(Hons) FPMI ACII, Head of Research| Email: