Developments in Employee Benefits law and practice

18 February 2019

Government response to consultation on protecting DB schemes 

A new criminal offence of ‘wilful or reckless behaviour’ in relation to pensions will be introduced under proposals to crack down on abuse of final or average salary schemes.

Responding to the consultation on protecting defined benefit pension schemes, Secretary of State for Work and Pensions Amber Rudd, said:

“The vast majority of bosses take their responsibilities seriously and look after their workers’ retirement funds.”

“However, for too long the reckless few playing fast and loose with people’s futures have got away scot-free. Acts of astonishing arrogance and abandon punished only with fines, barely denting bosses’ bank balances.”

“Meanwhile workers who have done the right thing and saved for retirement, confident their investments were safe, are left facing a leaner later life.”

“That cannot be right, which is why, for the first time, we’re going to make wilful or reckless behaviour relating to pensions a criminal offence.” 

On a related note, the Pensions Regulator has welcome the response document

Number of workers auto-enrolled hits 10m

The Pensions Regulator’s latest compliance figures reveal that the number of workers auto-enrolled into a pension scheme since 2012 has now reached around 10 million -

tweet sheet 2

Latest contracting-out countdown bulletin 

The latest Bulletin contains important information about the reconciliation of current and past scheme members information. It can be downloaded here 

VAT and pension fund management services

An order has been made that inserts a VAT exemption into UK law for fund management services provided to pension schemes that are solely funded, whether directly or indirectly, by members; where the members bear the investment risk; which contain the pooled contributions of more than one member; and where the risk borne by the members is spread over a range of investments.

The exemption should apply to most defined contribution (DC) pension schemes. Whilst this exemption is not currently set out in legislation, HMRC has allowed schemes to claim its benefit since the 2014 ATP case. The order will come into force when the UK leaves the EU. 

PPF reappoints D&B

Professional Pensions reports that he Pension Protection Fund (PPF) has reappointed Dun & Bradstreet (D&B) to model insolvency risk for its levy calculations, replacing Experian. 

The firm will take over the brief from the 2021/22 levy year and will also be tasked with building an online portal for levy payers.

D&B was originally appointed to the PPF upon its launch, but was later dropped in favour of Experian in 2015. 

Families running pension scams

Organised crime groups led by married couples or families are running pension scams worth millions of pounds.

Intelligence gathered by members of the multi-agency Project Bloom group, which was set up to tackle pension scams, indicates that a number of “fraudster families” are targeting pension holders.

Criminal investigations involving regulators, government agencies and police forces are currently ongoing into a number of these gangs. In addition, a number of individuals linked to the scams have been suspended or banned from being trustees and companies used for scams have been shut down.

In some cases the families have hired rogue financial experts with specialist pension knowledge, including accountants, advisers and trustees, to run the large-scale scams for them. Without these professional enablers the frauds would not be successful.

Victims of pension scams lost an average of £91,000 each to fraudsters in 2017 but some people have lost much more.

They reported receiving cold-calls, offers of free pension reviews and promises that they would get high rates of return - all of which are key warning signs of scams.

A ban on pension cold calling came into force earlier this month. Firms that break the rules could face penalties of up to half a million pounds.

The partners in Bloom met last month to discuss the scams problem and how the partners could work even closer together to target those responsible.

Representatives of the Pensions Scams Industry Group (PSIG) also reported that pension providers are identifying more suspicious transfer requests than ever before and alerting members to what they believe could be scams. This follows the voluntary body issuing a new code of good practice to trustees, providers and administrators in 2018 that features guidance on carrying out due diligence well. 

Finance Act 2019 receives royal assent

The Finance (No 3) Bill 2017-19 received Royal Assent on 12 February 2019, becoming the Finance Act 2019

IOPS consultation on new ESG guidelines

The International Organisation of Pensions Supervisors (IOPS) has launched a public consultation on its draft supervisory guidelines on the integration of environmental, social and governance (ESG) factors in the investment and risk management of pension funds. The consultation is open for feedback until 11 March 2019.

The consultation document contains a set of guidelines on the integration (i.e. interpretation, role and use) of ESG factors in the area of supervision of pension fund investment and risk management. It proposes also enhanced disclosure requirements by supervisory authorities of ESG factors by pension funds.

The United Nations Environment Programme – Finance Initiative says the proposed guidelines will be critical in promoting ESG integration amongst pension fund regulators, and will provide an important regulatory support for sustainable pension fund management on an international level.

Costs of uprating State pension in ‘frozen countries’

This ad hoc analysis provides an estimated cost of uprating State Pension for overseas residents living in countries where State Pension increases are not paid.

This publication updates figures last published in 2013 on the costs of uprating the State Pension in frozen rate countries.

Contact:

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