Employee Benefits | Pensions Bill Tax | Teachers Pension

17 November 2014

Week ending 16 Nov: Taxation of Pensions Bill latest|Teachers’ Pension Scheme (Scotland)| SMEs expect AE support

Taxation of Pensions Bill – latest developments

The Bill has now moved to Committee Stage, at which the latest amendments will be considered.

A new Schedule provides that persons other than dependants can inherit unused drawdown funds. Two new categories have been created: a “nominee” of the member and a “successor” of the member, the latter being an individual nominated by a dependant of the member, a nominee of the member, a successor of the member, or the scheme administrator.  Thus benefits on death can be paid to beneficiaries not just dependants.

For deaths before age 75, lump sum death benefits and flexi-access drawdown pensions from these funds can be paid tax free.

For benefits paid on death after that age remain taxable.

See - https://www.gov.uk/government/publications/pension-flexibility-2015

Teachers’ Pension Scheme (Scotland) (No. 2) Regulations 2014

A reformed pension scheme will be introduced for Scottish teachers from 1 April 2015. The scheme, established by the Scottish Public Pensions Agency, includes a pension based on the member’s average career earnings and normal pension age equal to the state pension age.

These regulations follow the Public Service Pensions Act 2013 and were initially recommended by the Independent Public Service Pensions Commission.

The operation of the Scottish Teachers’ Pension Scheme 2015 is outlined in the regulations. Each member will build up a pension each year calculated at 1/57th of the member’s pensionable earnings. The pension will be held in an account and indexation will be applied annually so that:

• an active member receives an indexation rate of 1.6% points above the rate of the consumer price index (CPI)
• a deferred member receives an indexation rate equal to the CPI rate

Provisions have also been made for a pensions board and scheme advisory board as well as the opportunity for members to elect for faster accrual contributions at 1/5th, 1/50th and 1/45th.

Small and micro employers expect support with automatic enrolment

According to new research by NEST, only 23 per cent of small and micro employers say they are ‘confident’ about dealing with pensions issues, whilst 1 in 3 lack confidence in dealing with payroll and 74 per cent intend to turn to someone for support with automatic enrolment such as a payroll provider, IFA or accountant.

The research also reveals that 74 per cent of small and micro employers currently don’t offer a pension to their workers. Approximately 45,000 small and micro employers are set to reach their automatic enrolment staging date in 2015.

A majority of small and micro employers deliver payroll in-house (72 per cent) so will need to look at their payroll processes to see if they are ready for automatic enrolment and may well turn to payroll service providers for support. 54 per cent of these employers use specialist payroll software, 13 per cent use standard software packages like Microsoft Excel and, worryingly, 1 in 10 don’t know what payroll system they use. Depending on their current set-up, employers will require varying levels of support from the payroll community.

New PMI best practice guide on pension administration agreements

The Pensions Management Institute has launched a revised best practice guide on pension administration agreements.

The guide is relevant both for third party administrators and schemes where administration takes place in-house. It replaces the PMI's model administration agreements, and provides a starting point for trustees and administrators to consider what should be included in their agreement. See -
http://www.pensions-pmi.org.uk/news-and-publications/pmi-launches-guide-on-pension-administration-agreements/

The Occupational Pension Schemes (Levies) (Amendment) Regulations 2015

The consultation seeks views on the enclosed draft of the Occupational Pension Schemes (Levies) (Amendment) Regulations 2015, which would make changes to the rates of the Pension Protection Fund (PPF) administration levy for each of the years 2015/16, 2016/17 and 2017/18. The intention is that the first change will come into force on 1 April 2015, and the subsequent changes on 1 April 2016 and then 1 April 2017. See -
https://www.gov.uk/government/consultations/the-occupational-pension-schemes-levies-amendment-regulations-2015.