Week ending 21 June: Latest on State and private pensions reform| HMRC Newsletter and suspension of ROPS list
Latest on State and private pensions reform
George Osborne, the Chancellor of the Exchequer, has said that the Treasury will consult next month to ensure that people are not charged excessive early exit penalties and are treated fairly when moving their pension in order to access the flexible options introduced from April 2015.
The consultation, due to launch next month, will look at:
- options to address any excessive early exit penalties. These include, if there is evidence of such penalties, the option of imposing a legislative cap on these charges for those aged 55 or over
- making the process for transferring pensions from one scheme to another quicker and smoother, to help people make use of the new freedoms.
The Economic Secretary to the Treasury, Harriett Baldwin, has also written to Martin Wheatley, CEO of the Financial Conduct Authority (FCA), confirming that the FCA will, concurrently, gather information from providers to understand the scale of the problems facing individuals who want to transfer to a different pension provider.
The announcement follows an earlier statement from Mr Osborne highlighting that 60,000 pension savers have withdrawn a combined £1bn from their pension pots since the pension freedoms came into effect on 6 April. He said -
“It is a sign that this is a real success, but we have to make sure that people get the best advice, that the market responds and that companies up their game in helping customers make use of these freedoms. We will be watching these things very carefully”.
Following media reports this week, the Treasury has also confirmed that inherited DC pots will not be subject to inheritance tax.
Baroness Altmann, the Pensions Minister, in her maiden speech in the House of Lords, said that she wants to “improve people's understanding of and engagement with pensions” and “ensure they are fairer and sustainable”.
She also acknowledged that the new State pension was not yet been properly understood and needed to be communicated more clearly.
On the forthcoming consultation, she added that industry, consumer groups, media and individuals will be invited to submit evidence of the actual reality facing customers in the new landscape. She also said that the initial success of auto-enrolment must not lead to complacency.
Meanwhile, Frank Field has been elected as chairman of the House of Commons Work and Pensions Committee. The other committee members are due to be nominated by the House of Commons in the next few weeks.
And finally, according to the Office for Budget Responsibility, the basic state pension triple lock cost an estimated £2.9 billion in 2014/2015, more than seven times the amount forecast in June 2010.
Chief Secretary to the Treasury Greg Hands told Parliament that the government's six-yearly review of state pension age would “have a substantial positive impact on long-term fiscal sustainability”. The OBR projects that state pension spending will be 0.8% of GDP lower by 2064/65 than if the state pension age had risen with currently legislated changes.
Minister for Pensions Ros Altmann has announced there will be an independent review of the state pension age by 2017.
FOS voluntary jurisdiction widened to reflect pension changes
Proposed amendments to extend the scope of the Financial Ombudsman Service (FOS) voluntary jurisdiction will go ahead, following a recent consultation. An instrument amending the VJ rules was passed by the FOS board.
The changes reflect the new defined contribution pension scheme regime which requires savers to seek advice from an adviser authorised by the Financial Conduct Authority (FCA) in connection with transfers and conversions of pension benefits.
The FOS reports it did not receive any comments or suggestions throughout the consultation period. As such, the Voluntary Jurisdiction Rules (Advising on Conversion or Transfer of Pension Benefits) Instrument 2015 was passed by the FOS board and approved by the FCA in April 2015.
The changes are set out in the FCA’s Handbook Notice 21.
EIOPA: Occupational pensions stress test and quantitative assessment
EIOPA has published the second set of Q&As, an updated DC reporting template and DC calculation tool in relation to the above. All can be found by following this link.
Pensions Ombudsman publishes factsheet about redress for non-financial injustice
The Pensions Ombudsman has published a factsheet about redress for non-financial injustice, such as distress and inconvenience. It confirms that the usual starting point for awards will be £500 or more, and in most cases they will range from £500 to £1,000. If the non-financial injustice is not significant, no award is likely to be made.
HMRC Newsletter and suspension of ROPS list
HMRC has published Newsletter 69 which confirms that, as part of the recent pension flexibility changes, HMRC is now starting work on the April 2016 changes which include changes to the pension death benefit rules.
There is also confirmation with regard to in-year tax repayments that arise from the new pension flexibility rules. A new repayment process requires the use of three new forms, P50Z, P53Z and form P55. These new forms (which replace the standard P50 and P53 repayment claim forms) enable HMRC to deliver a priority 30 day processing turnaround for repayments.
Coinciding with the deadline for QROPS managers to respond to HMRC’s letter of 17 April (requiring re-submission of the (newly revised) form APSS 251), HMRC has confirmed that it had temporarily suspended the ROPS notifications list (formerly known as the QROPS list).
Normally updated on or about the 1st and 15th of each month, the list last appeared on 8 June. It will return in an updated form by 1 July.
During this period of uncertainty, JLT will suspend overseas transfers.