Employee Benefits Updates | Freedom & Choice Reforms | JLT

19 January 2015

Week ending 18 Jan: Freedom and choice reforms latest|Retirement is changing|Online campaign raises awareness of pension scams

Latest on 'freedom and choice' reforms

Pension Schemes Bill completes committee stage in House of Lords

The Pension Schemes Bill 2014/15 completed the committee stage in the House of Lords on 12 January 2015. Recent developments include:

  • Criticism from the Delegated Powers and Regulatory Reform Committee about the number of the delegated powers the Bill confers, with almost every power subject to only the negative Parliamentary procedure.
  • Agreement by the government to bring forward an amendment to clause 48 of the Bill in order to provide more detail about the meaning of "appropriate independent advice" for DB to DC transfers.
  • It intends to define appropriate independent advice by reference to activity regulated by the FCA. There will though be an exception for individuals with pensions wealth below £30,000.
  • During the committee stage, a number of government amendments were agreed including

        - Provision to extend pensions guidance to survivors of members who have benefits to which the flexibilities will apply.

        - In the context of independent advice in respect of conversions and transfers, extending the circumstances in which a scheme must check a member has received appropriate independent advice to include where a member or survivor takes an uncrystallised funds pension lump sum in return for safeguarded benefits.

  • A number of opposition amendments were withdrawn following debate, including an amendment to introduce a power to impose a cap on charges that may be imposed on members of flexi-access drawdown funds.

An updated version of the Bill is available along with a new Keeling version showing the changes to existing legislation that would result from the Bill. 

Pensions guidance service to be called 'Pension wise' 

The brand name of the new pensions guidance service has been unveiled as Pension wise: Your money. Your choice by the Economic Secretary to the Treasury, Andrea Leadsom. 

The service will offer free and impartial guidance to people on the new pension freedoms which come into effect in April. An update on delivering pensions guidance is available here.

Retirement is changing

New government research shows how the way we view retirement is changing, as well as the challenges that older workers can face.

Nearly half of over 50s want to keep working between age 65 and 70. Only 17% say that working full time and then stopping work altogether would be the best way for them to retire.

Nearly two-thirds of over 50s no longer think that working full time and then stopping work altogether is the best way to retire and around half of them would still like to be in work between 65 and 70, according to new government research showing how retirement is changing.

The research, part of Dr Ros Altmann's work as Business Champion for Older Workers, shows how the way we view retirement is changing, as well as the challenges that older workers can face. The independent YouGov survey of over 2,000 retired and non-retired people aged over 50 reveals people are now looking towards a more flexible retirement and that traditional views of retirement are becoming a thing of the past. The poll shows:

  • 39% of over 50s not currently retired said that working part time or flexible hours before stopping work altogether would be the best way to retire
  • over 1 in 4 said they would be interested in taking a few months off and then returning to work as an alternative to retirement.

Individuals will be able to opt-in to PFM

Giving evidence to the DWP Select Committee, the Pensions Minister, Steve Webb, said that the default will be for relevant individuals to be given the choice to opt-in to automated transfers (also known as pot follows member PFM). This represents a change to the proposal that, starting next year, relevant pension pots be automatically transferred unless the individual exercises their right to opt-out.

New online campaign launched to raise awareness of dangerous pension scams

The Pensions Advisory Service (TPAS) and the Association of British Insurers (ABI) have launched a collaborative online social media campaign to help raise consumer awareness about the risks and consequences of pension scams and provide some tips to help consumers protect their financial future.

To accompany the online campaign, an infographic has been developed providing a look at the 'hooks' and 'hustle' techniques scammers use and say, and what the real life consequences are. It also provides the top five tips on how to avoid being scammed and what to do if you're not sure about what's being offered or who to contact if you think you're already a target.

Draft code of practice no. 14: Governance and administration of public service pension schemes

Draft code of practice no. 14 - Governance and administration of public service pension schemes has now been laid before Parliament and the Northern Ireland Assembly.

The code relates to public service pension schemes established under the Public Service Pensions Acts, new public body pension schemes and to other statutory pension schemes which are connected to those schemes. These schemes principally cover civil servants, the judiciary, local government workers, teachers, health service workers, fire and rescue workers, members of police forces and the armed forces. They have around 12 million members. The code does not apply to schemes in the wider public sector.

The code is particularly directed at scheme managers and pension board members of public service schemes. It sets out the standards of conduct and practice expected of them and also includes practical guidance to help them comply with legislation, including new requirements, which come into force in April 2015.

Together with the legislation, the regulator's powers will come into force from 1 April 2015.

The regulator has also published an essential guide to help scheme managers and pension board members navigate the code.

View the code here.

Pensions Regulator sets out approach to publishing information about cases

The Pensions Regulator has released a guide setting out its approach to publishing information on its regulatory and enforcement decisions using its powers under Section 89 of the Pensions Act 2004. The guide explains that when considering publishing reports on certain cases the regulator will take into account one or more of the following aims, together with the public interest: transparency; education and guidance; and deterrence. It also explains that, where one or more of these aims are met, the regulator will also take into account factors which may weigh against publication in whole or in part - for example, any adverse impact on market behaviours, or that prejudice the regulator's investigations or investigations by other bodies.

Information published will include 'restricted information' under Section 82 of the Pensions Act 2004, which is normally subject to restrictions on its further use and disclosure.

New State pension

The government has updated its new State pension toolkit.

The latest materials are available here:

new State Pension: information for employers and trustees with open, contracted-out defined benefit pension schemes

new factsheets.

According to a DWP response to a Freedom of Information request, the proportion of individuals in Great Britain who will get at least the full new State Pension is as follows:

  • 45% of those retiring between 2016 and 2020
  • 62% of those retiring between 2021 and 2022
  • 77% of those retiring between 2026 and 2030
  • 81% of those retiring between 2031 and 2035.

After the mid 2035s the DWP estimates the proportion of individuals who will have at least the full rate of the new State Pension will remain at between 80% and 90%. The response also shows the proportion of individuals who will have at least 60%, 70%, 80% or 90% of the full rate of the new State Pension.

Making the system fit for purpose

ILC-UK research finds that the majority of people approaching retirement want to use their pension pots to deliver a secure guaranteed income for life, with inflation protection being very important, but many may be too confused to know how to go about achieving this goal.

The new research Making the system fit for purpose  finds that consumers approaching retirement are ill-equipped for new pension freedoms.

Supporting DC members

The Pensions Policy Institute (PPI) has published Supporting DC members with defaults and choices up to, into, and through retirement: qualitative research with those approaching retirement, a report sponsored by State Street Global Advisors.

The research uses insights from a series of in-depth interviews and focus groups with savers approaching retirement with Defined Contribution (DC) pensions that make up the majority of their private pension savings. It explores preferences for how, in light of the new legislation, they might wish to draw a retirement income, the financial trade-offs that they are willing to make, and the default products and strategies that could best support them.

he research finds that the Budget freedoms are popular with DC savers. However once they begin to understand the full scale of choices and trade-offs involved in deciding how to access their DC pension pots at retirement they can quickly become daunted. This suggests that disengagement and inertia amongst consumers from April 2015 is a key risk without the provision of effective default strategies and appropriate guidance and advice.

The PPI research uncovers a number of specific risks which policy makers, regulators and the pensions industry should work together to address.

Pension Ombudsman publishes three pensions liberation determinations

The Pensions Ombudsman has published three January 2015 Determinations relating to pension liberation: Kenyon (PO-1837), Jerrard (PO-3809) and Stobie (PO-3105). In all of the cases, the substantive complaints (against providers that refused to act on transfer value requests because of pensions scam concerns) were not upheld. A JLT Technical Bulletin on the cases and their implications is available on request.


John W Wilson LLB(Hons) FPMI ACII, Head of Technical, JLT Benefit Solutions

Email: john_wilson@jltgroup.com