Personal Finance Society news update from 29 July 2015 - 11
August 2015 on taxation, retirement planning, and investments.
Taxation and Trusts
Taxation and trusts
Strengthening sanctions for tax avoidance -
Consultation on detailed proposals
HMRC has published a consultation on detailed
proposals around strengthening sanctions for tax avoidance.
This consultation builds on the principles established in the
earlier consultation 'Strengthening Sanctions for Tax Avoidance'
published in January 2015.
This consultation builds on the responses to the earlier
consultation and outlines the detail of these measures to ensure
that the changes are appropriately designed. It also considers
further additional measures that are needed for serial avoiders,
serial promoters and how to strengthen the impact of the General
Anti-Abuse Rule (GAAR) in tackling marketed avoidance schemes.
For serial avoiders - this detail includes how the regime should
be structured and what the entry criteria should be; what extra
reporting requirements should apply to serial avoiders; how a
surcharge might work; restricting access to certain reliefs; and
when it would be appropriate to name the most persistent serial
For promoters - this detail includes the new threshold criteria
definitions, including the number of schemes to be considered over
a specified period of time.
For the GAAR - this detail includes introducing a penalty; the
circumstances in which a penalty will be charged; the penalty rate
chargeable; and safeguards to ensure proportionality. The
consultation also sets out some further areas for consideration
under the GAAR.
The consultation closes on 14 October and it will be interesting
to see the outcome.
Tax lock legislation
Much was made of the so-called triple tax lock in the run up to
May's election. Now that it is being legislated for, it is worth
asking what it means in practice.
"…we can commit to no increases in VAT, Income Tax or National
Insurance." So went the triple tax lock pledge on page 9 of the Conservative manifesto. It was something of a
surprise commitment, probably prompted by David Cameron responding
in PMQs to a question from Ed Miliband about whether a future
Conservative government would raise VAT after the election (as
happened in 2010). The Prime Minister's promise that he would not
increase the rate of VAT took the wind out of Ed Miliband's sails,
as previously there had been much Conservative prevarication about
Freezing the rates for income tax, VAT and NICs appeared to mean
freezing the rates on the three biggest revenue sources for the
Exchequer. The former Chancellor, Lord Lawson, was among those who
criticised the idea as unnecessarily constraining the Treasury's
room for manoeuvre if the economy hit problems in the next five
years. It was in his - and many others' eyes - pure politics.
The 'Income tax lock' and 'VAT lock' are the first two clauses in the Summer Finance Bill 2015, while
the 'National Insurance Contribution lock' is virtually the only
content of the snappily titled National Insurance Contributions (Rate Ceilings)
The income tax lock simply caps the rates of basic, higher and
additional rate tax at 20%, 40% and 45% until the next election.
There is no mention in the Bill of the starting rate for savings,
nor rates applicable to dividends. The fate of dividend taxation -
destined to raise another £2bn a year once the behavioural effects
die down in 2019/20 - says much about the value of the lock. The
lock only applies to those three income tax
rates. The Chancellor still has plenty of scope to
manipulate what is taxed at those rates and how tax bands
apply. Witness, for example, the continuation of £150,000 as
the additional rate threshold and the £100,000 starting point for
phasing out the personal allowance. The lock applies to 'income tax
charged' in a tax year, not to income tax relief - worth
remembering at a time when the government is floating ideas about
another round of pension 'reforms'.
The NIC lock is even more of a chimera. It always seemed odd
that there should be a pledge not to increase NIC rates when the
government had committed to killing off Class 2 and bringing Class
4 onto a contributory benefits-related basis. And that was before
the question of what Class 4 contributions should be when the
single tier pension starts in 2016/17, boosting state pension
benefits for the self-employed. The same single tier question mark
hangs over Class 3. So it really should be no surprise that
what has now emerged in the Bill is only a Class 1 NICs rate lock,
with an additional guarantee that the upper earnings limit (UEL)
will not exceed the higher rate threshold.
Now consider that the idea of combining income
tax and NICs has once again been floated, leading to the creation of an
'earnings tax', ie a tax not applicable to savings or investments
and, more significantly, not a 'locked' tax. The Centre for Policy
Studies (which has flown a squadron of kites on potential
Conservative tax reform) says that earnings rate tax could be at
32% (20%+12%), 42% (40% + 2%) and 47% (45% + 2%). There is a
problem to be resolved in the £2,540 gap between the unpublicised
primary earnings threshold and the much-vaunted personal allowance,
which accounts for nearly £7bn of Exchequer income. The
self-employed are also an issue, although that would disappear if
the new Class 4 rate became 12% (by no means impossible). And
there's a further bump in the merged road with what to do about tax
relief on pension contributions…but that too might be smoothed away
soon with the Treasury's contribution top-up idea…
What is the triple tax lock worth? The HMRC/Treasury TIIN can answer that: "This measure is not
expected to have an Exchequer impact".
Promised cap on care costs delayed until
Government plans to introduce a £72,000 cap, on the amount
self-funders would have to contribute to their long-term
residential care costs, have been postponed until April 2020 due to
concerns over a growing funding gap in adult social care and
financial pressures on local councils. The cap was one of the key
measures included in the coalition's Care Act due to be introduced
from April 2016.
Two other key reforms that have also been postponed until April
- the duty on councils to meet the eligible needs of self-funders
in care homes at their request and
- the more generous means test limit for residential care which
was due to increase from £23,500 to £118,000 from April 2016.
The move follows calls from the Local Government Association -
an organisation that represents councils inEnglandandWales- to
delay the reforms and instead put the cash that would have been
used to implement them into the social care system itself which is
already critically under-funded.
The decision has been generally welcomed by charities in the
social care sector, supporting the notion that developing a
sustainable care system should be the priority.
The Care Act 2014 received Royal Assent in May 2014
and is being implemented in stages. Part 1 of the Act, which saw
the introduction of a universal deferred payment arrangement and a
national minimum eligibility threshold, took effect in April 2015;
while the cap on care costs and an increased higher capital limit
were due to be introduced under Part 2 of the Act in April
The delay of the phase 2 reforms until 2020 means that for the
time being at least immediate care annuities and pensions
will continue to satisfy a critical need for those who (or have
elderly relatives who) might need care.
Annual Investment Allowance changed from January
(AF1, AF4, RO2, RO3, CF2, FA7)
The permanent level of the annual investment allowance (AIA)
available to businesses is to be £200,000 with effect from 1
January 2016 as confirmed in clause 8 of the Summer Finance Bill 2015. The AIA was
scheduled to be £25,000 from 1 January 2016. The change has
effect for expenditure incurred on or after 1 January 2006.
This comes as welcome news for business owners who otherwise
anticipated it to reduce dramatically to £25,000.
Paragraph 4 of Schedule 2 to Finance Act 2014
provides the transitional rules for chargeable periods that
straddle 1 January 2016. It treats the actual chargeable period as
two separate chargeable periods; one ending on 31 December 2015 and
one commencing on 1 January 2016. The maximum allowance for the
whole of the actual chargeable period is the sum of the maximum
amounts calculated for each of these two separate periods. It
provides a further restriction for the second period commencing on
1 January 2016 such that for expenditure from that date no claim
can be made for more than the maximum for that second period.
So, for example, a company with a chargeable
period, from 1 April 2015 to 31 March 2016, would calculate its
maximum AIA entitlement for the whole period based on:
- the proportion of the period from 1 April 2015 to 31 December
2015, that is, 9/12 x £500,000 = £375,000, and,
- the proportion of the period from 1 January 2016 to 31 March
2016, that is, 3/12 x £200,000 =£50,000.
The company's maximum AIA for the whole period
would, therefore, be £425,000.
If the company incurred no qualifying
expenditure in the period 1 April 2015 to 31 December 2015 and then
spent, say, £60,000 in the period 1 January 2016 to 31 March 2016,
the maximum AIA available to that company for expenditure in that
particular part period would be limited to £50,000. Writing-down
allowances would then be available for the remaining unrelieved
Whilst this new proposal is useful, the position on initial
capital allowances will not be as attractive as now.
Currently, it is possible to obtain an AIA of £500,000 for
expenditure incurred before 31 December 2015. From 1 January 2016,
this reduces to £200,000 (albeit that is was due to reduce to
£25,000). This may mean that the timing of planned business
investment ought to be reviewed.
Where substantial short-term expenditure is envisaged, advantage
should be taken of the AIA, particularly as the size of the AIA
will reduce to £200,000 from 1 January 2016.
Capital allowances will continue to be an important feature of
tax life for businesses. Of course, as for any expenditure,
businesses should consider carefully the commercial appropriateness
of any investment. Especially in the light of the latest
proposals, advisers must be fully aware of the capital allowance
system so that they can properly advise their business clients on
the tax impact of various items of expenditure. Closer to home they
may be interested in how capital allowances work for their own
The EU Succession Regulation - New cross-border
(AF1, RO3, JO2)
EU Regulation No 650/212 will come into force on 17 August
2015. It affects individuals with property in more than one
EU State and aims to harmonise succession rules across the Member
Although the Succession Regulation (commonly known as Brussels
IV) was passed in 2012, it becomes effective on 17 August this year
and it will only apply to estates of people who die on or after
Although theUK(along withIrelandandDenmark) opted out of this
Regulation, it still has implications for anyone who owns assets in
any of the other EU Member States, in particular places such
The Regulation applies a single national law of succession to a
person's moveable and immovable property passing on death whether
the person has made a will or not. The applicable law is the
law of the country where the deceased had their habitual residence,
- the deceased was manifestly more closely associated with
another State (which will be decided on a case by case basis),
- the deceased elected in their will for their national law to
With the increased mobility of individuals, particularly across
the European Union Members States, problems arising from
cross-border issues where a person's estate includes investments or
property abroad, and how such assets are to be dealt with in the
event of death, have been known about for many years.
As indicated above, the Succession Regulation attempts to
harmonise succession rules for all Member States and so, whereas in
the past different laws could apply depending on where the
individual's assets were located, from 17 August 2015 the general
idea is that the law of the country in which the individual had
been habitually resident prior to their death would apply to all
assets in their estate regardless of the location of the asset.
The fact thatIreland, theUKandDenmarkhave opted out somewhat
frustrates the purpose of the Regulation. However, the Regulation
will still have an effect onUKnationals with property in other EU
Member States. This is because aUKtestator can elect to
choose the law of their nationality to apply even if that State is
not a signatory to the Regulation. It is also expected that
the choice of law of the opted-out State will be applied within
that State. This is particularly relevant to theUK, in
particular in relation to the doctrine of Renvoi which applies
where there is a potential conflict of laws. More on this
The practical implications of the above are as follows:
UK habitual residents with property in another EU
(AF1, RO3, JO2)
For English people habitually resident in the UK but with
property in another Member State, under the EU Regulation the
relevant law of succession will be that of their habitual
residence, ie. English, Scottish etc. However, this is where
another problem arises. For example, if an Englishman dies
with a property inFrancebut with the rest of his estate inEngland,
the French property will pass in accordance with English law.
However, under English law, the French property, in accordance with
a doctrine known as Renvoi, will, as at present, pass in accordance
with French succession rules whilst the rest of the estate will be
governed by English succession rules. This will mean that the
French forced heirship rules will not be avoided. What the
said individual will have to do in order to ensure that the forced
heirship rules are avoided, is to opt for English law to apply to
his worldwide estate in which case the doctrine of Renvoi will be
There is naturally a lot more to this Succession Regulation and
individuals with assets in more than one country should generally
be advised to consult a lawyer practicing in the country in which
they are either resident or where they have property. In some
cases a separate will may need to be prepared in respect of
property located in another EU State and, of course, even if
national law is chosen to apply to succession, this will not
regulate matters such as the conveyance of property to the legatees
or general succession matters such as testamentary capacity,
revocation, status of spouses, recognition of divorces
There are also a number of exceptions which apply as well as the
principle of "public policy" in accordance with which it is always
possible to set aside a provision of an otherwise applicable law if
it will be incompatible with the public policy of the relevant
State. It has even been suggested that it is possible that
the concept of forced heirship, such as that applying in France,
Italy, Spain or Germany, may be ruled to constitute a matter of
public policy and, in such a case, avoiding it by election for
national law to apply may not always be possible in
There are many questions that have been raised as a result of
the Succession Regulation that remain unanswered, as the lively
discussion on the STEP Trusts Discussion Forum illustrates. It will
be interesting to see how things evolve over time. However,
given that the Succession Regulation creates both opportunities and
pitfalls, depending on the circumstances of the individual, it is
important for anyone considering cross-border estate planning to
take advice and revisit their will.
Summer Finance Bill measure fixes settlement
(AF1, AF4, RO2, RO3, CF2, FA7)
Legislation has been included in the Summer Finance Bill 2015 to amend the
inheritance tax (IHT) rules relating to settlements created by
individuals before 22 March 2006 under which the settlor or their
spouse, widow, civil partner or surviving civil partner, has an
interest in possession.
Section 80 IHTA 1984 applies where a settlor or their spouse is
beneficially entitled to an interest in possession in property
immediately after it becomes comprised in a settlement. Where the
section applies, the property is treated as not becoming comprised
in a settlement at the time the trust is made but, rather, at the
time when the property becomes held on trusts under which neither
the settlor nor their spouse have an interest in possession. In
that event it is treated as becoming comprised in a settlement made
by whichever of them was last entitled to an interest in possession
in the property.
Changes made in 2006 provide that an "interest in possession"
for this purpose is restricted to a 'postponing interest' (defined
in section 80(4) as an immediate post-death interest or a disabled
person's interest); but only if the first occasion on which the
property became comprised in the settlement is on or after 22 March
2006. This has led to an anomalous position for interest in
possession trusts created before that date where an individual has
a pre-22 March 2006 entitlement to income which has continued after
21 March 2006 and their spouse then takes an interest in
possession, whilst they are still alive, after that date. In such a
case, it was possible for a (non-qualifying) interest in possession
to escape all IHT charges because the settled property was neither
part of the beneficiary's estate, nor was it comprised in a
relevant property trust.
The Summer Finance Bill 2015 measure fixes this unintended
effect of the legislation by replacing "interest in possession"
with "a qualifying interest in possession" wherever the term
appears in section 80 IHTA 1984. The change will mean that where
one party to a marriage/civil partnership succeeds to a life
interest to which their spouse or civil partner was previously
entitled during the latter's lifetime, section 80 will apply at
that time (because neither spouse would then have a qualifying
interest in possession). This means that the settled property would
then be treated as being comprised in a settlement and, as a
result, be subject to the relevant property charges.
The changes made to section 80 IHTA 1984 by the Summer Finance
Bill 2015 will ensure that the position in relation to life
interests for spouses or civil partners, whilst both partners are
alive, are put on a similar footing to other trusts. The amendments
will come into force on the day after the date of Royal Assent to
the Summer Finance Bill 2015 (expected to be early autumn).
New rules to target avoidance through the use of
(AF1, RO3, JO2)
Following a series of consultations on simplifying the charges
on trusts, legislation on the new draft rules for adding property
to more than one relevant property trust on the same day and the
calculation of inheritance tax charges on relevant property trusts
was originally published after the Autumn Statement 2014. The draft
legislation has now been published in its intended final form in
the Summer Finance Bill 2015.
It was announced in the March 2015 Budget that
changes would be made so that the new "same-day addition" rules
would only apply where the value added was more than £5,000. Also
it was announced that the period of grace for not applying the new
rules relating to additions to existing trusts arising under wills
executed before 10 December 2014 would be extended by 12 months and
would now apply where the testator/testatrix died before 6 April
The draft legislation is included in the Summer
Finance Bill 2015 and applies to trusts created on or after 10
December 2014 (unless those trusts receive added property from a
Will executed before 10 December 2014 where the deceased dies
before 6 April 2017).
This legislation will apply to charges under
those relevant property trusts that are affected which arise after
Royal Assent of the Summer Finance Bill 2015.
Excessive withdrawals from a donor's bank account are
sufficient evidence of an Attorneys dishonesty
(AF1, RO3, JO2)
The Court of Appeal (Criminal Division) has held that, where a
general deficiency in a donor's funds can be attributed to
withdrawals made by an attorney acting under a Lasting Power of
Attorney (LPA), this will be sufficient evidence to prosecute an
attorney for abuse of their position in accordance with section 4
of the Fraud Act 2006.
The case in point - RvTJC (2015 EWCA Crim 1276) -
involved an appeal against a decision of the Crown Court not to
proceed with the prosecution of a LPA attorney because there was no
evidence of specific fraudulent transactions. Instead the case had
been based on a broad-spectrum evidence of withdrawals from the
donor's accounts by the attorney that had seemed unreasonably high
given the needs of the donor.
The Court of Appeal determined that it would be acceptable to
present an amended argument that the total value of the withdrawals
made by the attorney, when set against the reasonable sums that
would have been incurred over specific periods in providing for the
donor, showed that the attorney could not have been acting
This case is a reminder that, in extreme cases, the
investigation team at the Office of the Public Guardian may refer
suspected financial abuse by attorneys to the police. It also shows
that it may not be necessary to match withdrawals of specific
amounts from the donor's funds against specific expenditure, for a
prosecution for financial abuse to succeed.
Illott family provision award tripled by Court of
(AF1, RO3, JO2)
The Court of Appeal has tripled an award made in pursuance of a
claim under the Inheritance (Provision for Family and Dependants)
Act 1975 so as to prevent the claimant from losing entitlement to
her means-tested benefits.
Last year in the case of Illott v Mitson the High Court refused
to increase a family provision award made to Mrs Illott by a
District Judge out of her late mother's estate, on the basis that
the £50,000 award constituted reasonable provision in all
In summary, Mrs Illott had brought a claim for reasonable
provision under the Inheritance (Provision for Family and
Dependants) Act 1975 after her mother had died leaving almost her
entire £486,000 estate to a group of charities. Although the
relationship between the deceased and her daughter was estranged
(and the deceased had clearly rationalised her decision to leave
her daughter nothing in a letter of wishes left with her will); the
Court agreed with Mrs Illott that it was 'unreasonable' for the
deceased to have made no provision at all for her daughter in
circumstances where she was in extreme financial need. Accordingly,
a £50,000 award was made and this award was ultimately upheld.
Mrs Illott had appealed in the first instance to the High Court
for the award to be increased - arguing that the award, being
insufficient to rehouse her and her family, would do no more than
reduce her means-tested benefits; but the High Court refused and
the appeal was accordingly dismissed. However, a further appeal to
the Court of Appeal (Illott v Mitson, 2015 EWCA Civ 797) has now
resulted in Mrs Illott having her award increased to £164,000 - a
sum that will enable her to buy her house from the housing
association that lets it to her, while keeping her means-tested
The Court of Appeal, dismissing the charities' objections to
raising the award on the basis that the deceased had no connection
with them and that they consequently had no expectation of any
benefit from the estate; stated that 'the appellant's resources,
even with state benefits, are at such a basic level that they
outweigh the importance that would normally be attached to the fact
that the appellant is an adult child who had been living
independently for so many years'.
While it is unusual for a claim under the 1975 Act, brought by
an adult child who is both capable of work and living independently
of the testator to succeed, this case illustrates that there are a
huge number of factors - including the conduct and expectations of
all those concerned - that can have a bearing on what, if any,
award should be made. Accordingly, parents who wish to disinherit
financially-challenged children should not only have a good reason
for doing so; they should also be able to demonstrate what connects
them to the people or organisations they have decided to benefit in
The June IA statistics
(RO2, AF4, CF2, FA7)
The latest Investment Association (IA) statistics show net
retail inflow in June 2015 was down almost a third on a year ago,
with fixed income funds seeing a second successive month of net
By the time the IA publishes its monthly statistics, it can be
easy to forget their context. So it was with June's numbers, published at the end of July. As a
reminder, June was the month whenAthens lurched towards Grexit
andChina started to melt down after the decision not to include
Chinese A-shares in the MSCI Emerging Markets index. That
background is reflected in some of the month's highlights:
- Net retail sales for the month were £1.534bn, 30% less than in
June 2014. The drop hides an increase of £1.387bn in gross
retail sales (to £13.937bn), more than countered by a £2.041bn rise
in retail repurchases (to £12.403bn).
- Equity was the most popular asset class in terms of net retail
sales, with a net inflow of £874m, up £72m from May. Mixed Asset
was the second best-seller with net retail sales of £404m, the
highest since July 2014.
- The most popular sector in terms of net retail sales was
Targeted Absolute Return, no doubt a reflection on the jittery
market conditions. The sector has been very popular for most of
2015, with total net retail sales in the second quarter of
£1.291bn. Second, third and fourth most popular sectors were UK
Equity Income, Mixed Asset (40%-85% shares) and Property. Perhaps
surprisingly, fifth place was taken by Europe exUK.
- 13 of the IA's 36 sectors had net retail outflows. The Asia
Pacific exJapansector suffered the most, seeing £226m disappear,
closely followed by £203m from the protected sector - nearly 10% of
that sector. All the non-gilt bond sectors saw outflows, with the
fixed income asset class as a whole losing £198m.
- The UK All Companies sector, which had been worst in terms of
net retail sales since January, saw £38m of net retail sales, the
first positive number since October 2014.
- The total value of tracker funds fell in line with the markets
and, at £104.348bn, now represents 12.1% of overall IA funds, up
from 10.4% of a year ago.
- Institutional net outflow amounted to £508m, the fourth month
of net outflow this year and a reversal from May's £904m
The Targeted Absolute Return sector now has £49.7bn of assets,
making it the fifth largest sector. Despite the name, the
sector has produced a wide range of returns over the past year
according to Trustnet: +24.2% at best and -10.1% at worst,
with an average of 4.1%. Over the last three volatile months, half
of the sector's funds have turned in a loss.
TPR updates publications to help small
(RO4, AF3, CF4, JO5, FA2, RO8)
The Pensions Regulator updates publications to help small
businesses on choosing a pension scheme
The Pensions Regulator (TPR) has stepped up its support for the
1.3 million small and micro businesses preparing for automatic
enrolment by publishing updated guidance to help them find a good
quality pension scheme.
The regulator is updating the suite of information and tools on
its website to make it as straightforward as possible for smaller
employers, many of which have little or no experience of pensions,
to get automatic enrolment right.
Research by the regulator suggests one in five (290,000)
employers will not seek advice when choosing a pension scheme,
while one in ten (130,000) do not know how to select a scheme, or
think it will be difficult.
Refreshed website content that has gone live in the middle of
July and includes information to help employers find a scheme
including, for the first time, a list of 'master trust' pension
schemes open to employers of all sizes, and which have been
independently reviewed to help to demonstrate that they are
administered to a high standard. The voluntary master trust
assurance framework was developed by the Institute of Chartered
Accountants of England and Wales (ICAEW) in association with The
Pensions Regulator to enable auditors to provide independent
assurance on scheme quality.
In addition, a quick guide for small and micro employers on what
to look out for when choosing a scheme suited to their needs, and
updates to website pages for IFAs and accountants, have been
The regulator's communications material will continue to
signpost employers to NEST, the scheme established by the
Government with a public service obligation to accept all
employers, the National Association of Pension Funds' PQM READY
site and the Association of British Insurers' list of automatic
Lesley Titcomb, chief executive of The Pensions Regulator,
"I strongly believe that the vast majority of the 1.3 million
small and micro employers approaching automatic enrolment want to
do the right thing. However, many will choose not to seek advice
and will need additional support to meet their duties.
We are committed to providing them with the information they
need to make confident choices when it comes to choosing a quality
scheme for their employees. My message to employers is clear:
prepare early to make the most of the wealth of support available
on our website. We are here to help.
Our research shows that large multi-employer pension schemes
such as master trusts and group personal pensions are better placed
to meet the standards we believe are necessary for good outcomes
for retirement savers. The list we have published today will help
employers more easily identify master trusts that have demonstrated
they can deliver quality standards, alongside other schemes
I strongly urge other master trust schemes to follow the lead of
those which have already committed to the voluntary assurance
framework so that the choice of quality schemes available for
employers continues to grow."
TPR publishes automatic enrolment compliance and
(RO4, AF3, CF4, JO5, FA2, RO8)
The Pensions Regulator (TPR) has published its latest quarterly automatic
enrolment compliance and enforcement bulletin covering the period 1
April to 30 June 2015.
This latest automatic enrolment compliance and enforcement
bulletin includes details of how many times the regulator has used
its statutory powers between April and June this year. It is the
last bulletin primarily representing medium sized businesses who
have implemented automatic enrolment and illustrates that most
employers in this group have complied without the need for the
regulator to use its powers.
However, the bulletin also highlights lessons to be learned for
small and micro employers. In particular it shows employers with
seasonal and temporary staff must take care when assessing workers
or postponing staff. These types of employers include recruitment
businesses, construction firms, bars and restaurants, caterers and
shop owners. These types of employers are reminded to ensure they
assess all staff and if they choose to use postponement they must
inform staff within six weeks of their staging date
With tens of thousands of small and micro employers starting out
on their automatic enrolment journeys in the coming months, the
regulator has warned of potential pitfalls to come.
Employers who do not comply with their duties on time should be
aware they will have to pay any missing pensions contributions that
occur because of the delay. The strategy and policy explains the
circumstances where the regulator will require contributions to be
The main numbers in this Bulletin are:
# in period
Total to Q2 2015
The power to demand information and documents under section 72
of the Pensions Act 2004
The power to inspect premises under section 74 of the Pensions
The power to search premises and take possession of content
under section 78 of the Pensions Act 2004
A Compliance Notice under section 35 of the Pensions Act 2008 to
remedy a contravention of one or more automatic enrolment employer
Unpaid Contributions Notice
An Unpaid Contributions Notice under section 37 of the Pensions
Act 2008 to remedy a late or non-payment due to a qualifying
Fixed Penalty Notice
A Fixed Penalty Notice under section 40 of the Pensions Act 2008
of £400 for failure to comply with a statutory notice or some
specific employer duties
Escalating Penalty Notice
An escalating penalty under section 41 of the Pensions Act 2008
of between £50 and £10,000 per day (depending on size) for failure
to comply with a statutory notice
It would seem that the level of enforcement action is increasing
as the number of jobholders in each employer passing their staging
date is falling.
Rise in SIPP-related compensation
(RO4, AF3, CF4, JO5, FA2, RO8)
The Financial Services Compensation Scheme (FSCS) has published its latest Annual Report and
Figures in the report show:
- The Scheme received more than 53,000 new claims in 2014/15.
That's an almost identical number to that received the year
- However, the makeup of claims was significantly different
- FSCS has seen a marked increase in new general insurance
provision claims; 21,900 during the year compared with 14,328
received in 2013/14.
- Claims against intermediaries advising on investments and on
life and pensions business are growing in both cost and
- The average compensation payment for SIPPs-related claims
against independent financial advisors went up by nearly 50% to
£16,375. That compares with last year's average payment of
As a result of these claims, the Scheme raised an interim levy
of £20m in March 2015. It expects SIPP-related claims to continue
to rise in 2015/16.
FSCS Chief Executive, Mark Neale, says: "FSCS is there for
consumers when financial services firms fail. We take that
responsibility very seriously. During the year, as well as paying
out £327m in compensation, to over 24,000 claimants we handled over
142,000 enquiries covering all aspects of our work.
Our priority is to deliver a service that puts consumers first.
That is why we have worked hard to modernise our service by
overhauling our handling of claims, through the delivery of
Connect, to give people more choice in the way they deal with us.
Connect will establish the foundations for our operations for years
to come and improve the efficiency of claims handling. It will
enable FSCS to respond rapidly to future business failures. That is
at the heart of building consumer confidence."
The Scheme also continued to deliver on its imperative to
maximise recoveries to reduce costs for levy payer. FSCS recovered
funds totalling £560m from the estates of failed firms. This
included £494m from the major banking failures of 2008/09.
Mark Neale, FSCS Chief Executive goes on to say:
"Pursuing recoveries is a vital way in which we deliver savings
to the industry. Our strategy and interventions are producing
highly positive results to the benefit of taxpayers and levy payers
The levies received from the industry in 2014/15 totalled
£1.076bn, compared with £1.1bn in
2013/14. This figure includes the interest cost and capital
repayment levy for the banking failures of 2008/09.