Developments in Employee Benefits law and practice

14 January 2019

Social Security treatment in event of no deal

The Government has published four draft Statutory Instruments in relation to the social security treatment of individuals in case of a ‘no deal’ Brexit. Broadly, the draft legislation attempts to maintain the current EU principles and rules on social security coordination as a result of the UK’s withdrawal from the EU in the event that there is no withdrawal agreement and no future relationship agreement. However, without the reciprocity from each of the relevant other EU/EEA member states there is a risk of social security liabilities in the UK and another EU/EEA country for cross border workers.

LGPS consultation on New Fair Deal

Consultation proposals have been published which would strengthen the pensions protections that apply when an employee of a Local Government Pension Scheme (LGPS) employer is compulsorily transferred to the employment of a service provider.

The consultation proposals include draft amending regulations that will:

  • Require service providers to offer LGPS membership to individuals who have been compulsorily transferred from an LGPS employer (and remove the option of a broadly comparable scheme).

  • Provide for the automatic transfer of LGPS assets and liabilities when employers in the scheme are involved in a merger or takeover.

Pensions and the self-employed

The Department for Work and Pensions has released a paper on enabling retirement savings for the self-employed. It is the first step towards meeting the Government’s manifesto commitment to make pension saving more accessible to the self-employed. The paper builds on the Automatic Enrolment Review 2017, which stated that the Government would carry out trialling activities on a number of different approaches aimed at improving retirement savings for self-employed people.

Contingency Fee Charging inquire launched

A new inquiry by the Work and Pensions Select Committee will look at the issue of contingency fee charging. To support the Financial Conduct Authority (FCA) in identifying the extent of the issue, the Committee has asked for evidence from anyone who has been affected by this issue.

By way of background, the Committee found that a supposedly independent financial adviser could be incentivised to give bad advice—i.e. suggest a DB transfer—because of the way their fees were structured: the adviser was only paid, or paid much more, if the person decided to take a DB transfer. This is known as “contingent charging”.

Updated insolvency practitioner guidance

The PPF has updated its guidance to insolvency practitioners, including specific guidance notes on pre-packs, practitioner remuneration, CVAs, potential legal actions, and the PPF's standing in insolvency proceedings.

EIOPA report on costs and performance of pension products

The European Insurance and Occupational Pensions Authority (EIOPA) have published a report on the costs and performance of pension and insurance products, following a request from the European Commission to the European Supervisory Authorities (ESAs). The Report covers pension products, insurance and retail investment and is the first of a series of periodically published reports.

In the report, EIOPA provides aggregate data on the costs of insurance-based investment products across the EU and, to a limited extent, certain personal pension products. It also sets out the net performance for the period between 2013 and 2017.

FCA sector update for pensions

This publication provides the FCA’s annual analysis of the changing financial landscape, the resulting impacts on consumers and market effectiveness.

With regard to the pensions sector, the FCA observes that key drivers of change in the sector include a number of the themes identified in their cross-sector themes chapter, such as the ageing population, increasing individual financial responsibilities, the low yield environment, and the emergence of new technologies such as robo-advice. Pension freedoms also continue to reshape consumers’ retirement income choices.

The prospect that consumers may lack an income in retirement that is adequate or, at least, in line with their expectations remains the central challenge for the sector. Our analysis shows that areas such as pension scams, or poor value, or unsuitable products can all contribute to this central concern. In addition, the potential for poor pension services to lead to poor outcomes for consumers is an area of increasing concern.

Lifetime Allowance 2019/20

The Finance Act 2004 (Standard Lifetime Allowance) Regulations 2019 (SI 2019/29) were made on 10 January 2019. With effect from the start of the 2019/20 tax year the standard lifetime allowance will increase from £1,030,000 to £1,055,000.

HMRC tax thresholds 2019/20

HMRC have published a comprehensive list of income tax and NIC rates and thresholds relevant to employers for 2019/20.

They have also published a comprehensive online guide to help employers ascertain which employee benefits and expenses must be declared on forms P11D.

Tax Thresholds 2019/20

England and Northern Ireland

PAYE tax rates and thresholds  2019 to 2020

Employee personal allowance

£240 per week
£1,042 per month
£12,500 per year

English and Northern Irish basic tax rate

20% on annual earnings above the PAYE tax threshold and up to £37,500

English and Northern Irish higher tax rate

40% on annual earnings from £37,501 to £150,000

English and Northern Irish additional tax rate

45% on annual earnings above £150,000

Scotland

PAYE tax rates and thresholds

 2019 to 2020

Employee personal allowance

£240 per week
£1,042 per month
£12,500 per year

Scottish starter tax rate

19% on annual earnings above the PAYE tax threshold and up to £2,049

Scottish basic tax rate

20% on annual earnings from £2,050 to £12,444

Scottish intermediate tax rate

21% on annual earnings from £12,445 to £30,930

Scottish higher tax rate

41% on annual earnings from £30,931 to £150,000

Scottish top tax rate

46% on annual earnings above £150,000

Scottish Income Tax rates are subject to approval by the Scottish parliament. Should Scottish parliamentary approval not be obtained, this page will be updated with any further changes before 6 April 2019.

Wales

PAYE tax rates and thresholds

2019 to 2020 

Employee personal allowance

£240 per week
£1,042 per month
£12,500 per year

Welsh basic tax rate

20% on annual earnings above the PAYE tax threshold and up to £37,500

Welsh higher tax rate

40% on annual earnings from £37,501 to £150,000

Welsh additional tax rate

45% on annual earnings above £150,000

Welsh Income Tax rates are subject to approval by the National Assembly for Wales. Should National Assembly approval not be obtained, this page will be updated with any further changes before 6 April 2019.

Contact:

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