Developments in Employee Benefits law and practice

12 February 2018

Weekly update on new developments in the pension industry for week commencing 12 February 2018

TPR publishes British Steel restructuring report

The Pensions Regulator has published a report on its decision to approve a major restructuring of the British Steel Pension Scheme (BSPS) by Tata Steel UK (TSUK).

The regulatory intervention report covers key stages in the case including how TPR assessed the application from TSUK for a Regulated Apportionment Arrangement (RAA), and its proposal for a new pension scheme.

It highlights how, in TPR’s views, the restructure represented a significantly better outcome for the BSPS than would be achieved under the insolvency of the sponsoring employer, the only other remaining alternative. The report demonstrates that TPR will only agree to an RAA if stringent criteria have been met to prevent the process from being abused.  

Safeguarded-flexible pension benefits: simplified valuation and introduction of personalised risk warnings

This guidance follows amendments to the Pension Schemes Act 2015 (Transitional Provisions and Appropriate Independent Advice) Regulations 2015. The amendments require trustees and scheme managers to:

  • send tailored communications (personalised risk warnings) to members with safeguarded-flexible benefits
  • use the transfer value of members’ safeguarded benefits, when assessing whether the value of their pension pots is above the threshold at which they are required to take financial advice
  • make transitional arrangements to inform members who are affected by the change in valuation methodology

Government response to Taylor Review

The government has proposed extending the right to a written statement of employment particulars to workers as well as employees, and has also accepted it must do more to promote awareness of holiday pay entitlements and increase the holiday pay reference period from 12 to 52 weeks. The proposals follow Matthew Taylor’s review of modern working practices in which he concluded the UK labour market requires greater transparency and clarity between workers and employers. The government now invites opinion on its proposed measures, to be received by 23 May 2018.

The proposals fail to address the issue of pensions for the self-employed and gig economy workers.

Financial Guidance and Claims Bill update

A new version of the Bill as amended in Committee is now available to download. The Bill, which includes provisions on the replacement for Pensions Wise, will next be considered at Report Stage and Third Reading on a date yet to be announced.  

IASB issues amended IAS19

International Accounting Standard (IAS) 19 Employee Benefits specifies how a company accounts for pension costs in its financial statements.

When a change to a DB plan takes place, IAS 19 requires a company to re measure its net defined benefit liability or asset.

The amendments require a company to use the updated assumptions from this re measurement to determine current service cost and net interest for the remainder of the reporting period after the change to the plan.

Until now, IAS 19 did not specify how to determine these expenses for the period after the change to the plan. By requiring the use of updated assumptions, the amendments are expected to provide useful information to users of financial statements.

The amendments are effective on or after 1 January 2019.

FCA paper on non-workplace pensions

The FCA has published a discussion paper on effective competition in non-workplace pensions (DP18/1).

The FCA explains in DP18/1 that it is using “non-workplace pensions” as an umbrella term for individually arranged contract-based defined contribution (DC) pensions, most commonly individual personal pensions (IPPs), stakeholder personal pensions (SHPs) and self-invested personal pensions (SIPPs).

DP18/1 is aimed at firms that operate non-workplace pensions, other participants in related markets and consumers who have contributed to a non-workplace pension or plan to do so in the future.

Contact:

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

Stephen Williams, Senior Research Consultant | Email: stephen_williams@jltgroup.com