Week ending 10 May: Conservatives on course for majority: What will that mean for pensions?
Conservatives on course for majority: What will that mean for pensions?
As forecasts give the Tories enough seats to form a slender majority in the Commons, a reminder of what their manifesto said about pensions:
- Reduce tax relief on pension contributions paid by those earning more than £150,000, by reducing the annual allowance to £10,000 once an individual's income reaches £210,000 (so they lose 50p for every additional £1 of income between £150,000 and £210,000). The saving will be used to pay for the increase in the inheritance tax allowance for married couples and civil partners to £1 million.
- Commitment to the “triple lock”, under which the basic State pension rises by the highest of the rise in average UK earnings, the rise in inflation (measured by the Consumer Prices Index) and 2.5%.
- Introduction of single tier State pensions system.
Pensions Minister Steve Webb and MP for Thornbury and Yate has lost his seat in the General Election to Conservative candidate Luke Hall
Regulator publishes latest auto enrolment compliance and enforcement quarterly bulletin
This bulletin is designed to help employers, their advisers and the pensions industry as a whole understand the type of compliance and enforcement interventions that follow the regulator’s educative and enabling communications and support. There were 621 automatic enrolment cases closed between 1 January and 31 March 2015, meaning that 2,782 cases have been closed to date. The bulletin covers the following:
- Selected powers used in the period, including:
- 213 compliance notices
- 198 fixed penalty notices of £400 for failure to comply with a statutory notice or some specific employer duties;
- 4 escalating penalty notices of between £50 and £10,000 per day (depending on size) for failure to comply with a statutory notice.
- Preventing non-compliance.
- The role of business advisers in automatic enrolment.
- Regulation changes update – effective 1 April 2015.
- Consultation launched on the need for a basic automatic enrolment assessment tool.
- Lessons learned for employers from the regulator’s casework.
- Employers should ensure they know what they will need to do to comply with their duties.
- Employers should check what services the pension scheme provides.
- Declarations of compliance proactive drive.
Netherlands delays annuity reform
Plans to allow Dutch pensioners with defined contribution savings to postpone the purchase of an annuity will be pushed back, according to Jetta Klijnsma - state secretary for the Social Affairs Ministry.
At the moment, DC pots in the Netherlands must be converted into an annuity as the member reaches the state pension age.
The government had been expected to allow savings to be invested continually until a later date. However, a letter to Parliament states that the government needs more time to work out the responsibilities of pensions providers towards DC members.
According to Klijnsma, adjusting the framework for DC plans raised complicated questions about the implementation of some legal aspects, including providers’ scope of duty towards members, and who would be responsible for investments.
GAD update looks at DC pension freedoms
The latest issue of the Government Actuary’s Department’s 'Investment & Risk Update' includes an article on the recent changes to the freedom granted to Defined Contribution scheme members and the responses by pension providers in the UK.
The importance of the default fund is discussed with GAD noting that, whilst providers offer a range of funds to suit personal circumstances (such as age, wealth and risk appetite), around 80-90% of scheme members are currently in the default option, either as an active choice or through apathy. Providers are having to think carefully about how to design a default fund that delivers desirable outcomes for members exercising different options. Some providers are considering a wider range of funds whilst using a reforms-triggered increase in pensions advice to boost engagement around fund choices. This addresses the issue of funds meeting members’ needs and provides flexibility to manage changes in circumstances or plans.
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John W Wilson LLB(Hons) FPMI ACII, Head of Technical, JLT Benefit Solutions| Email: firstname.lastname@example.org