Developments in Employee Benefits law and practice

13 November 2018

Government commences CDC consultation

Conditional Defined Contribution (CDC) pension schemes allow contributions to be pooled and invested to give members a target benefit level. According to a just published Government consultation, advantages of CDC schemes include that they:

  • provide a savings and income in retirement option within one package that is potentially attractive to people who are uncomfortable making complex financial decisions at the point of retirement
  • enable the sharing of longevity risk between members, therefore providing each individual member with an element of longevity protection without the cost of accessing the insurance market
  • allow employers to offer their employees a pension scheme, which offers an income in retirement in the form of a pension from the scheme’s own assets, but without the risks and balanc sheet impact of sponsoring a defined benefit plan

The government recognises there is growing interest in CDC schemes, and the Work and Pensions Select Committee recently recommended that the government should act quickly to legislate to allow the schemes.

This consultation sets out proposals as to how a particular form of CDC scheme might work in the UK, and the legislative and regulatory regime that would be needed to support any such scheme. It gives an indication of the government’s policy intentions and likely focus of the legislation.

Latest Contracting-Out Countdown Bulletin 

The latest HMRC bulletin has just been published and includes articles on – 
Scheme Reconciliation Service (SRS) Stalemate Queries 
Phase 7 Automated Rerun Plan 
Scheme Financial Reconciliation 
Contribution Adjustment Action 
Requests for SRS data 
Scheme Cessation

CMA – Draft definitions of investment consultancy services

The Competition and Markets Authority (CMA) inquiry group is continuing its review of the submissions received during the consultation on the Investment Consultants Investigation Provisional Decision Report (published in July 2018) and will proceed to prepare its final report, which is currently scheduled for publication in December 2018.

Respondents to the Provisional Decision Report consultation have made various submissions regarding the definitions of ‘investment consultancy services’ (IC services) and ‘fiduciary management services’ (FM services) for the purposes of remedies that the CMA may impose in any Order following the publication of its final report.

To assist the CMA’s on-going consideration of potential remedies, the CMA is publishing working draft definitions of IC services and FM services and invites interested parties to submit their comments.

For the purposes of the present consultation, the CMA is seeking only high-level comments on the working draft definitions. Any draft Order would be subject to separate consultation in due course, when there would be an opportunity to comment on the detail of the definitions and other terms used in the Order.

Responses are required by 9 November 2018.

The CMA has also published a note of a trustee roundtable discussion held on 3 October 2018. 

Consumers' access to financial services inquiry launched

The Treasury Select Committee (TSC) has published the terms of reference for this new inquiry, which will consider whether certain groups of consumers are excluded from obtaining a basic level of service from financial services providers and whether vulnerable consumers pay more for financial services products. 

Finance Bill published 

Finance Bill 2018-19 was published on 7 November 2018. 
Provisions include a tax exemption for employer paid premiums into life assurance products. Also, employer contributions to certain overseas pension schemes will now allow the beneficiary to be any nominated individual or registered charity.

Barnardo cannot change measure of price inflation from RPI to CPI for pension increases 

On 7 November 2018, the Supreme Court, in Barnardo’s v Buckinghamshire and others [2018] UKSC 55, unanimously denied Barnardo’s permission to switch from the Retail Prices Index to the generally lower Consumer Prices Index as its measure for calculating benefit increases. 

Contact:

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