PPF compensation cap is increased for members with 21 or more years’ service
From 6 April 2017, the PPF compensation cap (which applies to members who are under their normal retirement age when a scheme enters a PPF assessment period) is increased by three per cent for each full year of pensionable service above 20 years, up to a maximum of double the standard cap. The standard PPF compensation cap is currently £38,505.61pa on retirement at age 65, before application of the PPF’s 90% reduction factor.
New investment guide for DB Schemes
The TPR has published a new investment guidance document for trustees of defined benefit pension schemes. The document includes guidelines on the factors and approaches to consider while investing scheme assets, along with the guidance on how to set up an investment monitoring dashboard. It also highlights the importance of “focused and timely monitoring” of scheme assets.
GMP equalisation consultation response
DWP’s consultation on GMP equalisation closed on 15 January with a response published in March 2017. Contributors were broadly supportive of the DWP’s proposed methodology which consists of applying an uplift where a member’s “opposite sex” benefits are assessed to be of greater actuarial value than their “same sex” benefits, followed by conversion of GMPs into “normal” scheme benefits. There are a number of details still to be worked through and the DWP acknowledges that its proposals are not the only way to achieve GMP equalisation.
Transfer charge of 25% to Qualified Recognised Overseas Pension Schemes
The Government has introduced an ‘overseas transfer charge’ of 25% of the amount transferred. If the transfer is made by a registered pension scheme, the scheme administrator will be expected to report and pay the charge. The charge will be waived in the following cases:
- The transfer is being made to the country where the member resides
- The transfer is being made by residents of the EEA who have a QROPS based elsewhere in the EEA
- Occupational schemes sponsored by the member’s employer.
LEGISLATION PUT ON HOLD TO CLEAR THE WAY FOR GENERAL ELECTION
The following changes were proposed by the Government but following the announcement of a General Election, are no longer taking place. However, depending on the results of the General Election, we could see these changes being reintroduced at a later date.
Annual Allowance reduced for individuals who have flexibly accessed benefits
Individuals who flexibly access or have already flexibly accessed registered pension scheme savings will be subject to the £4,000 money purchase annual allowance (MPAA). The MPAA is reduced from £10,000 to £4,000 with effect from 6 April 2017.
Pensions Advice Allowance
A new income tax exemption has been introduced to cover the first £500 worth of pensions advice provided to an employee (including former and prospective employees) in a tax year.