Developments in Employee Benefits law and practice

04 December 2017

Weekly update on new developments in the pension industry for week ending 4 December 2017: Finance Bill 2017 / 18 | Benefit and pension rates 2017 / 18 | DB fund management and VAT | New Chair’s Statement guidance | New Scheme Return guidance | ACA ‘pension trends’ survey | The State Pension Revaluation for Transitional Pensions Order 2017 |

Finance Bill 2017 / 18

Following the Autumn Budget, the Finance Bill 2017/18 has been published.

Schedule 3 – Pension Schemes – contains measures on the master trust authorisation scheme.

Master trust schemes will be assessed against 5 key tests:

  • persons involved in the master trust scheme are fit and proper
  • that the scheme is financially sustainable
  • that each scheme funder meets specific requirements in order to provide assurance about their financial situation (including through presenting a business strategy and full, audited accounts)
  • the administrative and governance systems/processes used in running the scheme are sufficient
  • the scheme has an adequate continuity strategy

Benefit and pension rates 2017 / 18

The DWP has published a list of the proposed benefit rates and pension rates for 2018-19.

DB fund management and VAT

The High Court has released its judgment in the case of United Biscuits. The taxpayer lost, with the Court deciding that a non-insurer’s fund management supplies to defined benefit (DB) schemes are subject to VAT.

The background to the case is that, following the Court of Justice of the European Union (CJEU) decision in the ATP case, the management of defined contribution (DC) schemes is exempt from VAT, but management of DB schemes following the CJEU decision in Wheels is subject to VAT. However, historically HMRC allowed all pension fund management services supplied by regulated insurers to be treated as exempt from VAT. Hence, services of DB pension fund management provided by insurer were exempt from VAT but the same services provided by non-insurer were subject to VAT. United Biscuits had taken this point up in litigation arguing breach of fiscal neutrality given that insurers were allowed to benefit from an exemption not afforded to others.

The High Court’s key finding is that non-insurer’s services relating to fund management fall outside the insurance exemption and therefore should be subject to VAT when supplied to DB schemes.

The Court also took the view that insurer’s supplies to defined benefit schemes should be taxable.  This is in line with the Revenue and Customs Brief 3/2017 on the change of treatment of pension fund management services supplied by an insurer to DB schemes.

New Chair’s Statement guidance

The Pensions Regulator has published guidance clarifying its expectations as to the content of the DC Chair’s statement, and highlighting where more detailed information about scheme processes and evaluation methods is expected.

New Scheme Return guidance

For the first time, the Pensions Regulator (TPR) is schemes to report on the quality of their member data in the annual scheme return.

To help trustees and administrators make sure they’re doing the right thing, TPR has  published a checklist to guide them through all the new information they’ll need to provide, plus a new quick guide on how to measure scheme data.

The guide will help schemes measure their ‘common data’ (data common to all members like name, address, date of birth) and ‘scheme-specific data’ (data specific to their scheme like investment information), as well as proving information on how to get a data score. See-

DB Hybrid Scheme Return

DB Record Keeping  

ACA ‘pension trends’ survey

The latest results published by the Association of Consulting Actuaries (ACA) in the final report of this year’s ACA 2017 Pension Trends Survey confirm that over 40% of employees in smaller firms are being ruled not eligible for auto-enrolment into a workplace pension. The ACA says that when coupled with the self-employed – also presently not eligible – there still could be over 12 million of the UK workforce largely relying on the State pension and other State benefits post-2018, by which time most employers will have complied with the auto-enrolment policy. The survey also found employee opt-out rates are rising towards 1 in 4 at smaller firms, with many employers expecting rates to rise as minimum contributions increase in April 2018 and 2019. Post-2019, fewer than half the employers support increases in minimum AE contributions above 8% of qualifying earnings, a level which the ACA and many other bodies say is insufficient to generate an adequate income in later life.  

The State Pension Revaluation for Transitional Pensions Order 2017

This Order (SI 2017/1151) sets the revaluing percentage for State pension protected payments at 4 per cent for persons reaching State pension age on or after 10 April 2018.

The Pensions Act (PA) 2014 created a new State pension for persons reaching pensionable age on or after 6 April 2016. The part of a person’s new State pension based on their pre-April 2016 contribution record that exceeds the full rate of the new state pension as at 6 April 2016 is known as a “protected payment”. PA 2014, Sch. 1, para. 6(5) provides for the revaluing of protected payments by increasing these payments by the “revaluing percentage” specified in the last order under the 1992 Social Security Administration Act to come into force before the person reached pensionable age. The revaluing percentage is the percentage of the increase in the general level of prices since 6 April 2016. This Order specifies the revaluing percentage as 4 per cent for protected payments applicable to all persons reaching pensionable age on or after 10 April 2018.


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

Stephen Williams, Senior Research Consultant | Email: