The Week In Pensions provides you with a digest of the most important pensions legal and regulatory developments along with highlighting some of the most interesting stories from the pensions industry and national press.
In The Week In Pensions this week:
- DWP publishes response to its investment innovation consultation along with a new consultation on improving outcomes for members of DC schemes;
- Government launches consultation on application of public sector exit pay reforms to local government; and
- PLSA calls for adequate retirement income and immediate “net pay” anomaly reform.
And, in the pensions industry and national press:
- Half of pension transfers now trigger scam warnings; and
- Defined benefit pension deficits fall by £59 billion in August.
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Pensions legal and regulatory developments
DWP issues consultation response on investment and issues new consultation on DC outcomes
The DWP has published its response to the February 2019 consultation “Investment Innovation and Future Consolidation”, together with a new consultation on proposed measures to improve outcomes for members of DC pension schemes.
The new consultation sets out measures that are aimed at encouraging pension schemes to invest in a more diverse range of long-term assets, (including illiquid products such as venture capital and green infrastructure) and also proposals to require the consolidation of smaller DC pension schemes (those with total assets of less than £100 million) into larger ones.
The consultation closes on 30 October 2020.
More information
Government launches consultation on application of public sector exit pay reforms to local government
The Ministry of Housing, Communities and Local Government is consulting on proposals to reform exit payment terms for local government workers, in the light of forthcoming legislation which will impose a cap of £95,000 for exit payments across the public sector.
The government proposes the cap will apply to all exit payments associated with loss of employment, with this particular consultation focusing primarily on redundancy issues and the “pension strain” implications for the LGPS.
The pension strain arises because employees aged 55 or more can have immediate access to an unreduced pension if dismissed for redundancy or business efficiency grounds and the government wants this pension strain cost to come within the overall cap.
More information
PLSA calls for adequate retirement income and immediate “net pay” anomaly reform
The Pensions and Lifetime Savings Association (PLSA) has published its response to the House of Commons Treasury Select Committee’s call for evidence on pensions tax reform.
In its response, the PLSA highlights the importance of pensions tax relief in supporting adequate incomes in retirement and emphasises that the government should do more to encourage saving. The PLSA takes issue with the idea that pensions tax relief should be taken as an annual loss to the Exchequer, pointing out that, except for tax-free elements such as pension commencement lump sums, it merely defers taxation that will be levied on taking benefits.
One of the PLSA’s main concerns is to tackle the net pay / Relief at Source anomaly. This currently means that some low earners do not receive tax relief on their pension contributions. The PLSA believes this could be achieved by changing HMRC’s P800 process.
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Highlights from the pensions industry and national press
Half of pension transfers trigger scam warnings
According to XPS Pensions, there has been a significant increase in the number of scam warnings on transfers, with only one in eight cases between 2015 and 2018 flagging warnings, compared with half of all cases in the past two months.
Pensions Expert reports that the data includes predominantly defined benefit transfers, but a small proportion of defined contribution schemes also feature. XPS Pensions are reported as saying that the increase was likely to be down to a raft of savers looking to access their pensions after lockdown, as the peak of the Covid-19 pandemic caused many to suffer financial difficulties.
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Defined benefit pension deficits fall by £59 billion in August 2020
The aggregate deficit of the 5,422 defined benefit schemes in the Pension Protection Fund 7800 Index fell by £59 billion in August of this year. This meant the shortfall decreased to £140.5 billion at the end of August 2020 from £199.5 billion at the end of July 2020.
Section 179 liabilities were 92.6% funded in August 2020, up from 89.9% in the previous month. By the end of August, the total assets in defined benefit schemes stood at £1.75 trillion, while the total liabilities stood at £1.9 trillion.
According to the PPF, there were 3,506 schemes in deficit and 1,916 schemes in surplus.
More information
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Gowling WLG has one of the UK’s largest and most experienced pensions law teams. As well as publishing The Week In Pensions, the team issues The Month In Pensions podcast and agenda and regular Insights on key legal developments.
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Ian Chapman-Curry
Ian is a London-based professional support lawyer (PSL) legal director. Ian is a member of our pensions and combined human resource solutions (CHRS) teams. He works with clients to solve their employment and pensions law issues. Ian maintains a particular focus on 'crossover' issues that benefit from his understanding of both areas of law.