Employee Benefits Updates | WPSC auto enrolment | JLT

02 August 2015

Week ending 2 August: WPSC: 1st Special Report on AE progress| Exit charges consultation

WPSC: First Special Report – auto-enrolment progress

The House of Commons Work & Pensions Select Committee has published the above report which sets out the Government’s and FCA’s responses to the Committee’s report of March 2015. The Government notes that it will consult later in 2015 on proposals for improved transaction costs reporting (see below). FCA provides comments and , in some cases, sets out its next steps, on the topics of auto-enrolment governance and charges; legacy pension schemes; protecting savers; decumulation; and the “Pensions Dashboard”.

With regard to calls from various quarters for a single pensions regulator, the government commented

“We acknowledge other key recommendations made by the committee, such as the case for a single regulator and the creation of an independent Commission; however, it is important to me that we first focus on the successful roll out of automatic enrolment, pension flexibilities and charges, placing the consumer at the heart of what we are trying to achieve. I believe that Government resources will be better used focussing on this at this time.”

On the development of the Pensions Dashboard, the FCA summarised the current position as

“Together with DWP, we are currently looking at the various options for infrastructure, models and testing, as well as how best to work with industry to create the dashboard service. We are also now in discussions with the Government on the most effective and efficient way to develop the service.”

Separately, Frank Field, the Work and Pensions Select Committee chair, has written to the Pensions Minister, Ros Altmann, demanding more information on the pension freedoms.

Field requested more information on Pension Wise; in particular, a more detailed breakdown of the use of the different services, and how this has met the Treasury’s expectations.

Also, he asks the government to provide a response on the efficiency of the ‘second line of defence’ risk warnings delivered by providers and how this will be monitored. He asks too whether the government intend to consider the merits of encouraging providers to offer default decumulation options.

Field’s request also queries whether the government monitors the extent to which retirement income product customers fall victim to scams.

Ombudsman dismisses ‘GMP equalisation’ complaint

The Pensions Ombudsman has refused to uphold a complaint against the Campden RA Pension Scheme over an alleged miscalculation of a member’s deferred pension. In particular, he determined that the trustees of the defined benefit scheme were entitled to defer taking any action to address inequalities from Guaranteed Minimum Pensions (i.e. different payment ages and accrual rates) until required to do so by the government.

He said

“No one knows what to do about equalising GMPs. Lawyers and actuaries have different stances on whether, to what extent and how they must be equalised. The previous Pensions Ombudsman - who ruled that they must be equalised - was largely pushed back by the High Court.”

"Most schemes have taken no action to equalise GMPs and are waiting until the position is clarified. This is what the pension scheme had done in this case.”

Separately, the Pensions Ombudsman has received a number of similar complaints from members of the Police Pension Scheme concerning whether it was lawful to transfer the provisions of the scheme from the Police Pensions Act 1976 to the Public Service Pensions Act 2013. Having considered whether he can investigate these complaints, the Ombudsman has decided they are not within his jurisdiction.

Task force warns savers to be vigilant of the threat posed by scammers

A multi-agency task force of government, regulators, financial services bodies and criminal justice agencies are warning savers to be vigilant of the threat that scammers pose to their pensions.

Together they have released 5 top tips for staying safe.

Beware anyone calling out of the blue offering a free pensions review, it’s probably a scam. The best thing to do is to hang up. Beware companies offering early access to your money. This is rarely in anyone’s interests and you could be hit with exorbitant early exit fees plus a hefty tax bill. Beware companies offering to help you trace lost pensions or obtain a pension statement. These services are free from the government website GOV.UK. Scammers often charge for these services and use them as a way to gain your confidence and then steal your cash. Always contact The Pensions Advisory Service for free and impartial guidance to talk through your options and learn about how to spot a scammer. Remember: if someone promises you a rate of return that sounds too good to be true, it probably is.

Citizens Advice believes half of all scams reported to it are from people over the age of 55.

The hidden nature of pension scams is such that it is difficult to calculate exactly how much money has been lost, although recent industry estimates suggest it is close to £1 billion.

Project Bloom, a multi-agency group across government led by the National Crime Agency, was set up to tackle pension liberation fraud in a co-ordinated way. Members include the Department for Work and Pensions, The Pensions Regulator, the Financial Conduct Authority, HM Revenue & Customs, the Serious Fraud Office, the National Fraud Intelligence Bureau, and the National Crime Agency. A number of police raids have taken place, 15 scam websites have been suspended, and the National Crime Agency has snapped up 70 domain names to prevent them from falling into the hands of criminals.

In addition, The Pensions Regulator, which is investigating 9 cases of suspected pension scams, is refreshing its on-going Scorpion campaign to help safeguard savers and support trustees, working across government and with a range of partners.

The latest updates and information are available at www.pension-scams.com.

PPF long-term funding strategy update

The Pension Protection Fund (PPF) has published the fifth edition of its Funding Strategy Update, following the recent publication of its 2014/15 Annual Report and Accounts. The Update provides further detail on the PPF’s progress toward its funding target and how the risk environment influences this progress.

The PPF continues to believe that the funding strategy remains fit for purpose, and good progress is being made against it.

However, it says there are clear risks in the current economic climate, and regular monitoring remains essential.

Pensions Regulator rated highly by pensions industry

The performance of The Pensions Regulator has been rated ‘very good’ or ‘good’ by nearly 80% of respondents to its latest perceptions report. The eleventh annual perceptions tracker report reflects how the pensions industry rates the regulator on how well it carries out its statutory objectives, and the regulator has received positive feedback for the third year running.

Key findings:

78% of external audiences rated the regulator’s performance as ‘very good’ or ‘good’ 75% of employers rated the regulator’s performance as ‘very good’ or ‘good’, compared to just over half (52%) in 2014 The regulator has continued to exceed its target of over 70% average agreement with the ‘PACTT (Proportionate, Accountable, Consistent, Transparent and Targeted) Better Regulation’ principles, with an average rating of 72% in 2015 91% agree that the regulator is a ‘trusted source of information’ 72% believe the regulator is 'approachable', up from 65% last year

The survey included new questions on regulator’s statutory objective to minimise any adverse impact on the sustainable growth of an employer. In this regard, 65% agreed that ‘the regulator takes into account the needs of the scheme and the employer in a balanced way’ and 76% agreed that ‘the regulator supports schemes to have a strong and ongoing employer’.

Closure of the Combined Pension Statement Service

The following announcement has been issued in respect of the above the service:

“This voluntary service was launched in 2001. Since then we have worked closely with some pension schemes and employers to enable them to provide their employees/scheme members with personalised State Pension estimates alongside Private Pension information.

“It has been decided that we will need to close the CPS service at the end of the current (2015/2016) tax year, when we will be moving to new IT systems.

“I should mention that the Department for Work and Pensions (DWP) and HM Revenue and Customs (HMRC) are working closely together to provide a transformed largely digital service. This service will allow individuals to access information about their National Insurance and State Pension in one place. We want to encourage people to use this interactive service. We are testing the new service with some customers at the moment. We are aiming to make it available publicly later this year.

“We have written to those schemes/employers who are part of the CPS service to make them aware of these changes.”

Regulator quarterly compliance and enforcement bulletin

New figures published by The Pensions Regulator show compliance with automatic enrolment law continues to be the norm but, with tens of thousands of small and micro employers starting out on their automatic enrolment journey in the coming months, the regulator has warned of potential pitfalls to compliance. The regulator has also updated its compliance and enforcement strategy and policy. Key points are set out below.

Between April and June this year the regulator issued:

119 compliance notices 50 unpaid contributions notices 68 fixed penalty notices 0 escalating penalty notices

Exit charges consultation

The Treasury has launched an immediate consultation and online survey to look at whether exit charges could be cut or capped for those looking to access their pensions early, and to ask pensioners and industry experts how to remove other barriers that may be stopping people enjoying the benefits of increased flexibility over their pension pot.

Both the Chancellor of the Exchequer, George Osborne, and Secretary of State for Work and Pensions, Iain Duncan-Smith, have raised concerns in recent weeks that some companies are failing to play their part in making pension freedoms available to savers.

The consultation will look at how best to remove barriers and in particular will investigate:

options to address excessive charges for early exit penalties. This includes the option to impose a legislative cap on these charges for those 55 or over if there is sufficient evidence how the process for transferring pensions from one scheme to another can be made quicker and smoother how we can ensure that there is greater clarity around the circumstances in which someone should seek financial advice

The Economic Secretary to the Treasury, Harriett Baldwin, and the Minister for Pensions, Ros Altmann, have also written to the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) asking them to gather information from the industry on the fees and charges customers currently face. TPR and FCA have already begun this important work.

PPF issues guidance on its approach to pre-pack administrations

The Pension Protection Fund (PPF) has published PPF Restructuring and insolvency team: Guidance note 2: Pre-packaged administrations.

The note sets out the approach adopted by the PPF to pre-packs where the same insolvency practitioner (IP) intends to continue as the office holder in the subsequent liquidation or company voluntary arrangement (CVA). The PPF's main concern is the risk that a pre-pack is used to separate a company from its pension liabilities, especially in ‘phoenix’ situations where the new company is controlled by or has strong links to the owners or management of the old company.

The PPF will examine the extent to which a company's unsecured creditors (particularly the pension scheme trustees) have been consulted before a pre-pack is undertaken.


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

Julian Rowe, Head of Technical | Email: julian_rowe@jltgroup.com