Developments in Employee Benefits law and practice

24 April 2019

GMP Conversion Guidance

DWP has published the first edition of guidance setting out how the GMP conversion legislation might be used to resolve the GMP inequality issue. It has been produced by the Department for Work and Pensions with the assistance of an industry working group.  

Government is considering further changes to the GMP conversion legislation to clarify certain issues. HMRC may also provide guidance to reflect the tax position for equalised schemes.

The guidance will be updated from time to time to reflect any changes to legislation that take place in the future and any material developments in case law.

Extending remit of IGCs

The FCA has published a consultation paper on extending the remit of Independent Governance Committees (IGCs). IGCs provide independent oversight of the value for money of workplace personal pensions provided by firms such as life insurers and some self-invested personal pension (SIPP) operators.

The consultation includes two key proposals:

  • To extend the remit of IGCs to report on pension provider firms’ policies on environmental, social and governance (ESG) considerations including climate change, member concerns, and stewardship, and clarifying for firms how they should take account of long-term risks and member concerns in investment decision-making. This follows previous work in response to the Law Commission’s report on Pension Funds and Social Investment, although in some respects the proposals go further than the Law Commission’s recommendations.
  • To extend the remit of IGCs to provide independent oversight of the value for money of investment pathways. This follows on from FCA work on the Retirement Outcomes Review; in January, FCA proposed that firms should offer ready-made investment solutions to the estimated 100,000 customers that enter drawdown without taking advice each year.

This consultation also discusses what FCA have seen in published IGC annual reports and from their engagement with IGCs. 

FCA priorities 2019/20

The Financial Conduct Authority (FCA)'s business plan for 2019/2020 includes its priorities for the pensions and retirement income sector and the retail investments sector. The FCA's aim is that pension savings and retirement income products support people to increase their financial provision for later life. It remains concerned about the potential harm to consumers' retirement income from unsuitable pension transfers, and that poor value products could be eroding consumers' savings in retirement.

The FCA has set out six priorities in the pensions and retirement income sector for 2019/20:

  1. Addressing the remedies from the Retirement Outcomes Review (ROR)
  2. Assessing competition in the non-workplace pensions market
  3. Maintaining action on improving defined benefit (DB) pensions transfers
  4. Further focus on the joint priority work with the Pensions Regulator (TPR)
  5. Proposals to enhance the effectiveness of Independent Governance Committees (IGCs), and
  6. Working with partners on the pensions dashboard

The FCA has also set out its related priorities in the retail investments sector in relation to:

a. Further review of advice suitability
b. Analysing the impact of the Retail Distribution Review (RDR) and Financial Advice Market Review (FAMR), and
c. Implementing the remedies in the Investment Platforms Market Study

The FCA has also set out its plans for further work on tackling scams as one of the aspects of its cross-sector priority on financial crime.

The FCA's ScamSmart campaign continues to raise awareness of the increased risk of pensions and investment scams, and the FCA will also continue to use supervision and enforcement work to tackle scams and fraud more broadly.

The FCA also notes that it has seen evidence of an increase in wealth managers' discretionary portfolios being used for pension scams, and poor conduct from wealth managers who make unsuitable investments in high risk assets for their clients, and says that its activities will improve its ability to prevent or reduce harm in this area.

FCA Research Agenda

This report sets out the broad areas of research most relevant to FCA’s mission, including: household finance and consumer behaviour; the structure, integrity and stability of securities markets; competition, innovation, and firm behaviour and culture; technology, big data, and artificial intelligence; and regulatory efficiency and effectiveness.

POD factsheet responds to Burgess overpayment case on status as ‘competent court’

The Pensions Ombudsman has published a factsheet setting out its view that the Ombudsman is a ‘competent court’ in relation to determinations for recoupment in overpayment cases, responding to points made in Arnold J's judgment in Burgess v BIC UK Ltd [2018].

Appeal against unauthorised payment charge in pension liberation case dismissed

In this case, Franklin v HMRC, the First-tier Tribunal (Tax) dismissed an appeal by a pension scheme member against an unauthorised payments surcharge in respect of an unauthorised payment that originated from a transfer out of a registered pension scheme into a self invested personal pension (SIPP). The tribunal concluded that it was just and reasonable for the member to be liable for the surcharge. 

The member had transferred benefits from an occupational pension scheme to a SIPP offering immediate access to funds though a “pension-backed loan” received by the member from the SIPP. Before transferring, the member took generic advice from the promoter that, notwithstanding threats of tax charges from HMRC, they believed no charges would arise.   

HMT consultation on Fifth MLD

HM Treasury has published a consultation on the transposition of the Fifth Money Laundering Directive. The Directive must be implemented by member states by 10 January 2020. Measures in the Directive promoting greater transparency about the beneficial ownership of private trusts will be of interest to pension scheme trustees and practitioners. Currently, a UK private pension trust is not required to register with the Trust Registration Service if it is already registered with HMRC's online pensions service.

The consultation period runs until 10 June 2019.  

Pension Wise evaluation 2017/18

This report presents findings from a quantitative evaluation of the Pension Wise service in the financial year 2017 to 2018.
 

Contact:

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