Employee Benefits Updates | Finance Bill | JLT International

29 March 2015

Week ending 29 March: Finance Bill and further pension tax regulations|FCA consultation on Pension Wise recommendation policy|FCA says‘be ScamSmart'

Finance Bill and further pension tax regulations

The Finance (No. 2) Bill 2014-15 has been formally presented to Parliament and has completed its stages in the House of Commons yesterday. The pensions provisions are at section 34 and Schedule 4.

Separately, three new sets of draft Regulations have been published for consultation:

  • The Registered Pension Schemes (Transfer of Sums and Assets) (Amendment No. 2) Regulations 2015. These provide for the new types of death benefits in the form of nominees’ and successors’ annuities where these annuities are transferred from one insurer to another.
  • The Registered Pension Schemes (Provision of Information) (Amendment No. 2) Regulations 2015. These amend the Information Regulations, requiring scheme administrators to tell beneficiaries where the payment of an annuity is subject to the lifetime allowance charge.
  • The Registered Pension Schemes (Audited Accounts) (Specified Persons) (Amendment) Regulations 2015. Amend who can audit the accounts of registered pension schemes.

Final governance and charge cap regulations

The Occupational Pension Schemes (Charges and Governance) Regulations 2015 (SI 2015/879) contain a range of measures aimed at protecting members of occupational pension schemes which offer money purchase benefits. These include capping charges in the default arrangements within these schemes at 0.75% annually of funds under management.

The changes come into effect on 6 April 2015.

AVCs and the charge cap

The Occupational Pension Schemes (Charges and Governance) (Amendment) Regulations 2015 (SI 2015/889) were laid before Parliament on 25 March 2015, following a consultation, and will come into force on 6 April 2015.

They amend the definition of a default arrangement of a pension scheme used for automatic enrolment to ensure that no arrangement solely receiving Additional Voluntary Contributions will be subject to the charge cap of 0.75%.

FCA consultation on Pension Wise recommendation policy

The Financial Conduct Authority (FCA) has previously published standards for HM Treasury’s designated guidance providers to meet in delivering Pension Wise. It is also required to monitor the providers’ compliance with its standards. Where the providers have breached the standards, the FCA is required to make recommendations to them and the Treasury, and it is now consulting on its policy for making such recommendations.

The consultation primarily affects the designated guidance providers delivering Pension Wise, but will also be of indirect interest to providers of and advisors on pensions and retirement income products as well as trustees of DC pension schemes.

Retirement income market study outcome

The Financial Conduct Authority (FCA) has published the final findings of its retirement income market study, which confirm that competition in the retirement income market is not working well for consumers. The FCA’s report also sets out how it intends to intervene in the market to make competition work better for consumers, including requiring firms to provide an annuity quotation ranking so that consumers can easily identify if they could be getting a better deal by shopping around.

Confirmed findings

The FCA has confirmed as final its provisional findings that competition in the retirement income market is not working well for consumers, in particular:

  • Many consumers are missing out by not shopping around for an annuity and switching providers, and some do not purchase the best annuity for their circumstances.
  • Consumers are deterred from engaging with their options by the length and complexity of wake-up packs, or because they do not believe the sums involved make shopping around worthwhile.
  • Consumers’ tendency to buy products from their existing provider weakens competitive discipline on incumbent firms and makes it harder for challenger firms to attract a critical mass of customers.
  • Consumers are highly sensitive to how options are presented to them. Savers reaching retirement will face a landscape that is more complex and will need support in making the right choices.


The FCA’s remedies are designed to support consumer choice in the retirement income market, particularly in light of the forthcoming pension reforms. They are:

  • Requiring firms to provide an annuity quotation ranking so that consumers can easily identify if they could be getting a better deal by shopping around.
  • Redesigning and behaviourally trialling the information that consumers receive from their providers, such as wake-up packs, in the run up to their retirement.
  • In the longer term, the creation of a pensions dashboard which will allow consumers to see all their pension pots in one place.

In addition, the FCA wants to see firms framing the options available to help consumers make good decisions, rather than to drive sales of certain products. The FCA will also be monitoring the market and tracking consumer outcomes, as well as the take-up of the Pension Wise service.

Next steps

The next phase of the FCA’s work on annuity comparisons and the replacement of wake-up packs will take place as part of its wider review of its rules in the pension and retirement area in summer 2015. The FCA has already started to design the behavioural trials that it will carry out with consumers, and is working with government to develop a Pensions Dashboard in the longer term. The market monitoring and framing recommendations will be ongoing pieces of work.

The FCA says it also remains on high alert for scams targeting consumers, including those who are at-retirement, and it will continue to take robust enforcement action against such activity.

State pension factsheets

New factsheets have been published which help explain the current and new State Pension schemes. They can be read here (note: this leads you to an external website).

Pensioner income projections

New DWP research examines future trends in some components of pensioner incomes. The results show projected impacts on pensioner incomes following:

  • changes to the State Pension in 2016
  • increases in defined contribution pensions due to automatic enrolment
  • continued decreases in the coverage of defined benefit pensions

The report Pensioner Income Projections considers these main sources of pensioner income from 2014 to 2060. It looks at aggregate incomes, and how these are made up from State Pension income, defined benefit pensions and defined contribution pensions. Analysis is also presented by gender and by income.

FCA says ‘be ScamSmart'

The FCA is launching the next wave of their ScamSmart campaign that highlights the warning signs consumers need to be aware of from scammers who want to trick people into investing their hard earned cash.

The new pension flexibilities, which come into force from 6 April 2015, mean thousands of people will be making vital decisions about their retirement, and this can be the very moment that unscrupulous fraudsters will offer investments with high returns. The FCA wants would-be investors to:

  • Reject cold calls – investment scammers will often cold call
  • Check the FCA Warning List
  • Get impartial advice

Automatic enrolment web guide launched for small businesses

Small businesses preparing for automatic enrolment now have a dedicated section on the Pensions Regulator (tPR) website to help them through the process. TPR research showed that this group of employers had very different needs from the larger companies who had already automatically enrolled their staff, so the Regulator has adapted the site to meet those needs.

Employers will follow an 11-step process: each step tells you when you should complete the task and how long it should take, as well as letting you know what's next. It also includes links to tools and resources to help the employer - and you, if you're sharing the tasks with them. TPR have also added a downloadable checklist to help employers keep track of their progress towards meeting their duties.

The 11 steps contained in the guide are:

  • Know your staging date.
  • Provide a point of contact.
  • Check who you need to enroll.
  • Create your action plan.
  • Work out your costs.
  • Check your records and payroll process.
  • Choose a pension scheme (or check your existing one).
  • Assess and enrol your staff.
  • Write to your staff.
  • Your ongoing automatic enrolment duties.
  • Complete your declaration of compliance.

TPR Corporate Plan

TPR latest corporate plan has just been published and sets out how tPR intends to continue to improve standards in workplace pension schemes and enable good outcomes for retirement savers. The plan outlines tPR’s strategic approach to regulating defined benefit and defined contribution schemes, and to the further implementation of automatic enrolment.

Funded Public Service Pension Schemes (Reduction of Cash Equivalents) Regulations 2015

These regulations (SI 2015/892) provide that cash equivalents will be required to be reduced when a member is transferring from a designated scheme to another scheme to acquire a right or entitlement to flexible benefits. The Regulations come into force on 16 April 2015.


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