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My PFS - Technical news - 29/03/16

Personal Finance Society news update from 16 March to 29 March 2016 on taxation, retirement planning, and investments.

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Taxation and Trusts

Investment planning


The Law Commission is to consider changes to the law on wills and testamentary capacity
The England and Wales Law Commission is considering plans to reform the will-making regime, including the rules for the validity of wills and testamentary capacity.  A consultation paper is expected in 2017 and a report and draft legislation in 2018.

The primary wills legislation, the Wills Act 1837, dates from the Victorian era. The law governing testamentary capacity, the mental capacity to make a will, derives from a case from 1870. It is perhaps not surprising that this area of the law is ripe for reform.

The Law Commission believes that the current law discourages some people from making wills, that it is out of step with social and medical developments, and that it may not work in such a way as to give best effect to a person's intentions on death.

The law has also been criticised as being difficult to understand and apply - and sometimes being unworkable in practice. The operation of the law, in cases where mental capacity is in question, is a particular and growing problem, since conditions that affect capacity are becoming more common as people live longer.

The Law Commission will focus on four areas of potential reform:

  1. Testamentary capacity;
  2. Formalities of a valid will;
  3. Rectification of wills; and
  4. Mutual wills.

The Law Commission will also consider how the law can be changed to encourage will-making in the 21st century and updated to reflect social and technological developments. For example, the Law Commission will question whether it is time to digitalize the will making process (as has been developed in conveyancing).
It is estimated that over 40% of adults in the UK do not have a will. Those who do may find that their wills may be found to be invalid after their death. Further, the current law has not been updated to reflect trends in modern society, particularly co-habitation between unmarried couples and second marriages.
One of the stated aims of the Law Commission is to reduce the likelihood of wills being challenged after death, and the incidence of litigation. There has been, in recent years, a visible increase in such litigation which is, needless to say, expensive as well as stressful if not traumatic for the bereaved.


Income tax and CGT changes from 6 April 2016 - The implications for trusts

Trustees need to prepare for changes to the tax treatment of dividends and interest and for the changes to the CGT rates coming into effect from 6 April 2016.  Here we consider some of the income tax and capital gains tax (CGT) changes taking effect from 6 April and how they will affect the trustees of different types of trust. We will also look at any planning opportunities the changes present.
Personal savings allowance
From April 2016 a personal savings allowance (PSA) of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers will be introduced in relation to savings income.
Trustees are not entitled to the PSA.  However, the fact that from 6 April 2016 banks and building societies will stop deducting tax on interest payments is of significance to trustees.
Gross payments of interest only will be made from 6 April on accounts with banks and building societies.  However, it was announced in the 2016 Budget that the government will change the tax rules so that interest from OEICs, authorised unit trusts, investment trusts and peer-to-peer loans may be paid without deduction of income tax from April 2017.
Changes to the tax treatment of dividends

From 6 April 2016, the 10% dividend tax credit will be abolished and a tax-free dividend allowance of £5,000 a year will apply to individuals. In addition, new tax rates above the allowance will apply and will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. The 38.1 % rate also applies to trusts, i.e. it is the new trust dividend rate. Where dividend income is received within the standard rate band (SRB) the trustee rate equals the basic dividend rate i.e. 7.5%. The £5,000 allowance does not apply to trustees or personal representatives. 

With the above in mind the following are the implications for trusts.

Discretionary trusts

The income tax rates paid by trustees on interest remains the same, i.e. 20% within the standard rate band and 45% on the rest. Where income is received without the tax credit, tax will have to be paid by the trustees. For trustees who have hitherto received only income within the SRB and with a tax credit, this will mean they will have to complete the Trust and Estate Tax Return and pay the appropriate tax, 20% on interest and property income and 7.5% on dividends. Remember that interest distributions from collectives will continue to be paid with a basic rate tax credit at least until April 2017.

The above applies to discretionary trusts and any other trust where the beneficiary has no vested right to income (interest in possession or IIP). If the trustees make a distribution of trust income, the beneficiary is assessed on "trust income" at their marginal rate(s) with an appropriate tax credit for the tax paid by the trustees. The PSA and dividend allowance will not then be available to offset against such trust income.

Interest in possession trusts

If the beneficiary has a vested right to income (IIP) the income retains its nature and so the beneficiary is taxed on interest or dividends as appropriate and the PSA and dividend allowance will be available to the beneficiary in the usual way.

Of course, if the trustees of an IIP trust actually receive gross interest or dividends (with no tax credit after 5 April) they will have a basic rate liability at 20% on interest and at 7.5% on dividends, but the beneficiary will receive an equivalent tax credit. So ideally any gross interest and any dividend income should be paid directly to the beneficiary. This way the trustees will not have to submit Trust and Estate Tax Returns.

Capital gains tax (CGT)

Budget 2016 announced a reduction in the CGT rates and this applies to trustees as well as individuals.

When trustees pay CGT the rate is currently 28%. From 6 April 2016 this rate will reduce to 20% except for carried interest and for chargeable gains on residential property (i.e. property other than that occupied by a beneficiary when the principal private residence relief may be available). The 28% rate will also remain for ATED-related chargeable gains.

The annual CGT exemption for trusts will normally be £5,550 in 2016/17. This will be diluted according to the number of trusts created by the same settlor but will never be less than £1,110.

These changes will take effect for disposals made on or after 6 April 2016.

Trustees of discretionary trusts who wish to avoid paying income tax on their own account, especially where up to now they have not had to submit returns because the trust income was covered by the SRB, could consider appointing an interest in possession to a beneficiary who is a basic rate or non-taxpayer subject, of course, to taking all the circumstances into account. Alternatively, they could consider reinvestment into non-income producing assets, assuming no actual income is needed.

Trustees of IIP trusts should ensure, wherever possible, that any trust income is mandated directly to the beneficiary entitled to the IIP if they wish to avoid submitting their own returns.

Trustees who are about to dispose of a trust asset which will give rise to CGT at the current higher rate of 28% should consider waiting until 6 April 2016 to benefit from the lower 20% rate. Of course, if the trustees have yet to use their annual CGT exemption for the current tax year they should consider using it before 6 April.


What do the Stamp Duty Land Tax changes mean for trustees and beneficiaries?

The new higher rates of Stamp Duty Land Tax have been widely publicised but what do the changes mean for trustees and beneficiaries? As usual, the devil is in the detail so, here, we take a closer look at the draft legislation published after the Budget and highlight some of the traps.

At Autumn Statement 2015, the Chancellor announced that as part of his 'five point plan' on housing, new higher rates of Stamp Duty Land Tax (SDLT) would apply to purchases of additional residential property completed on or after 6 April 2016. Following a period of consultation, draft legislation was published amongst the March 2016 Budget documents.  In addition, a summary of responses to the consultation and detailed guidance on how the new rules will operate in practice was also published.

Where residential property purchases are made by individuals, it will usually be fairly easy to determine whether or not the new higher rates should apply. In broad terms, if the consideration paid for the property is greater than £40,000 and at the end of the day of completion the individual owns two or more residential properties then (unless the new property has replaced the individual's main residence), the higher rates will apply.

But what is the position for individuals who unexpectedly inherit property when they are in the process of buying a main residence? Or for those who happen to be beneficiaries of a trust that owns property? These situations are far from infrequent and warrant a closer look at the draft legislation.

SDLT is charged on the consideration given for the property i.e. the price paid for the property. Where property is received as a gift - made during lifetime or on death - there will not usually be any consideration and the recipient beneficiary will not therefore be liable to SDLT. However, a beneficiary who has received property by way of gift will nonetheless own that property once the gift is completed and this may therefore affect the amount of SDLT that is paid by the beneficiary on any subsequent (additional) property purchase.

The new rules provide some relief for beneficiaries who inherit property under the terms of a will or an intestacy in certain limited situations. Broadly, if a purchaser of residential property has inherited other residential property less than three years before they make the purchase, then the inherited property will be ignored for the purposes of determining the number of residential property interests owned by the purchaser at the end of the day of completion if:

  • The beneficiary became a joint owner of the interest by inheritance; and
  • The combined interest of the beneficiary and any spouse or civil partner has at no point during the three year period ending with the date of the property purchase exceeded one half of the total value of the property.

What this means of course is that in all other cases (including where a beneficiary has inherited a residential property in its entirety), the inherited property will be taken into account when deciding what rate of SDLT should be charged on the later purchase. With no scope to claim back the difference between the higher and standard rates if the inheritance is sold after the new property purchase has been made (assuming, of course, it was not the beneficiary's main residence), those who find themselves in this situation will feel an inevitable pressure to make a rushed decision about the inherited property.

There is no equivalent relief for beneficiaries who receive property by way of lifetime gift and parents who are considering making gifts of property or interests in property to children as part of an inheritance tax (IHT) planning or asset protection strategy, should therefore consider the potential impact on the beneficiary's future plans before proceeding. The result could be particularly harsh for an adult beneficiary who has yet to buy their first home - if they own a share of their parents' residence in name only with the parent(s) remaining in occupation!

Adult beneficiaries of trusts that hold residential property could also be affected by the new rules if they are either absolutely entitled to the trust property or entitled to occupy the property for life or receive income from the rental of the property (i.e. an interest in possession). Such beneficiaries will be treated as already owning a residential property interest for the purposes of determining the rate of SDLT that will apply to any new purchases in their own name. Note that the interest in possession does not need to be a qualifying interest in possession for IHT purposes (such as an immediate-post death interest) for the SDLT rules to apply.

The new higher rates can also apply where trustees buy residential property and, for trustees of discretionary trusts, the position is particularly unfavourable as the new higher rates of SDLT 'for additional properties' will apply on the purchase regardless of whether the trust owns other property or not! The rate to be paid by trustees of bare or interest in possession trusts will depend largely on the purpose of the purchase and the position of the beneficiary. So, for example, if the new property is being bought to replace an existing trust property that is occupied by the beneficiary as their main residence, the new rates will not apply. If, however, the beneficiary owns their own home and the trust property is simply providing the beneficiary with an income, the higher SDLT rates would apply to the purchase of a replacement investment property by the trustees.

It is clear from a detailed consideration of the draft legislation, that the new SDLT rules for additional properties are more wide-reaching than they may have initially appeared and could have an impact on a wide range of client scenarios from trustee investments to estate planning and asset protection. First-time buyers and purchasers of residential property who have sold their main residence more than three years earlier (perhaps clients who have been living and/or working abroad) will also need to be mindful of the impact of the new rules if they have recently inherited property or are receiving rental income from a trust.



Retail Prices Index - ONS basket review 

Every year the Office for National Statistics (ONS) reviews and updates the basket of goods and services which it uses to calculate the various inflation indices. It has just published its 2016 revisions, which will take effect from the February inflation numbers, due to be published on 22 March.

The basket consists of about 700 items and on this occasion 14 have been removed and 15 new ones added, with a further 13 "modified". The adjustments are a reminder that measuring inflation is no simple matter. The tweaks come after amendments to the various sector weightings that took effect from January for CPI and CPIH (CPI+ housing costs) and February for RPI. What we spend our money on and how we allocate our expenditure are not static.

The headlines additions include:

  • Coffee pods and pouches of microwave rice have been added to represent types of prepared food and drink not already covered. Multipacks of meat-based snacks have been introduced to represent the market for buffet-type food.
  • Computer game downloads have been added, reflecting evolving trends towards online services: their inclusion splits the weight of existing computer games items.
  • Cream liqueur has been added "to help interpretation of a class where there is a high degree of price volatility due to discounts" (think Bailey's and Christmas).   In the same sentence the ONS also says nail varnish has been added to 'widen the list of cosmetics included'.
  • Lemons have been introduced 'to boost representation of citrus fruit'.

The rejects are an interesting comment on how life is evolving, but also reflect a rationalisation process by the ONS. They include:

  • Gloss paint and non-white emulsion have been replaced by a combined paint item 'as the class is over-covered' in the unwittingly punning words of the ONS.
  • On a similar basis, the restaurant main course of meat or fish and the separate vegetarian main course have been combined in a restaurant main course item.
  • Organic apples and organic carrots have been cut (sic), but the non-organic apple and carrot items have been amended so that they will cover both organic and non-organic produce.
  • Prescription lens and power points have gone because the ONS believes that price changes for these items are adequately represented by others that remain in the baskets.
  • CD Roms and rewritable DVDs have been expunged, thanks to streaming and downloading largely taking their place. When did you last buy either?
  • Nightclub entry fees have also been removed, the ONS arguing that this was 'due to collection difficulties [!] and reduced expenditure as the number of nightclubs is declining'.
  • A 'cooked sliced turkey item' has been replaced by cooked sliced poultry because turkey was increasingly difficult to find in shops. This is a reminder that to produce a price index, a representative range of prices for each item is necessary. 

The changes grabbed a few headlines, notably on the computer disc front. A more difficult aspect which all inflation index setters have to deal with is how to cope with increased performance of products and services. Think of what you expect from today's 4K internet-linked television against what as on offer a decade ago…


February inflation numbers

February saw no change in the rate of inflation.

Annual inflation on the CPI measure was unchanged in February, with the rate staying at +0.3%, the highest for a year. Market expectations were that the February inflation numbers would register a 0.1% rise.

The CPI showed prices up 0.2% over the month, whereas between January and February 2015 they rose 0.3% - the year-on-year figure did not change due to rounding. The CPI/RPI gap remained unaltered this month at 1%, with the RPI also staying flat on an annual basis (at 1.3%). Over the month, the RPI rose by 0.5%.

The stasis in the CPI annual rate was due to one main "upward contribution", offset by one main "downward contribution", according to the ONS:


Food and non-alcoholic beverages:Overall prices rose by 0.1% between January and February 2016, compared with a fall of 0.2% between the same two months a year ago. The overall upward contribution came from a variety of product groups, most notably vegetables and milk, cheese and eggs. Year-on-year deflation in this category is now -2.3%.


Transport:Prices overall were unchanged between January and February this year compared with a rise of 0.4% between the same two months a year ago. The largest downward effects came from road passenger transport and bicycles, where prices fell this year but rose a year ago, and second-hand cars, where prices fell by more than a year ago. Year-on-year deflation in this category is now -1.1%.

Core CPI inflation (CPI excluding energy, food, alcohol and tobacco) was also unchanged at an annual 1.2%. There are now only three out of twelve index components in negative annual territory, one less than last month. Goods inflation continues to be solidly negative (at -1.6%), while services inflation is distinctly positive (+2.4%).

There is nothing in these numbers to worry the Bank of England. It looks increasingly likely that this month's seventh anniversary of 0.5% base rates will run onto to an eighth in March 2017.


The Lifetime ISA

The announcement in the recent Budget regarding the introduction of a Lifetime ISA (LISA) from April 2017 has given us plenty to think about with regard to the future of savings strategies. 

We first came across the LISA back in 2014, when Michael Johnson, a research fellow at the Centre for Policy Studies think-tank, said that the government should transform individual savings accounts into lifetime savings accounts which would incorporate both ISA-like and pension-like features.

The LISA will enable those who are under the age of 40 to save up to £4,000 in each tax year with the added benefit of the government providing a 25% bonus on the contributions paid in a tax year at the end of that tax year. This means that where the maximum saving of £4,000 has been made the government bonus will equate to £1,000 bringing the amount invested up to £5,000 in the first and subsequent years. There will be no monthly cap on subscription amounts.

Savers will be able to make LISA contributions and receive the government bonus from the age of 18 up to the age of 50. So, effectively, someone who opens an account aged 18 will be able to secure lifetime savings of up to £160,000 (i.e. £128,000 saved by them and £32,000 as government bonuses). At age 50, permitted contributions can continue but there be no government bonus payable.

Opening a LISA will be almost identical to opening a standard ISA - so an LISA manager will apply their normal account opening process which would generally include asking for the appropriate identity documents which prove the saver's date of birth, National Insurance number, proof of address etc…It will also be possible for savers to open more than one LISA in their lifetime, but they will only be able to pay into one LISA in a tax year - thus the rules appear to align with the standard ISA.

The aim of the LISA appears to be two-fold - it is intended that savers will either use the funds to buy a residential property as a first-time buyer or to provide an alternative or an additional retirement fund.

Tax-free funds, including the government bonus, can therefore be used to buy a first home worth up to £450,000 at any time from 12 months after opening the account. If the house is being bought with someone else, both purchasers can use a LISA and each benefit from the government bonus. The rules are based on the rules applicable for the Help to Buy ISA, so any withdrawal must be for a deposit on a first property - so effectively the withdrawal together with the government bonus will be paid directly to the conveyancer.

In other cases, while money can be withdrawn at any time, if it is withdrawn before the investor turns 60, the government bonus (together with any interest and growth on the bonus) will be lost and a 5% charge will be payable. From age 60, full or partial withdrawals can be made and will at that time be paid free of tax. If funds remain invested, any interest and investment growth will be tax free. There are exceptional circumstances in which it will be possible to make withdrawals earlier, for example, terminal ill-health - the definition of which will align with that used for pensions.

For inheritance tax (IHT) purposes, the LISA will have the same treatment as other ISAs. Therefore, on the saver's death, the funds will form part of the deceased's estate for IHT purposes. If, however, the LISA is owned by somebody with a surviving spouse/civil partner, that spouse/civil partner will also inherit the LISA tax advantages and will be able to invest as much into their own LISA as the value of the deceased spouse's/civil partner's on top of their usual allowance.

Finally, it is important to note that any contributions to a LISA will count towards the overall £20,000 ISA contribution limit from next April.

It will be interesting to see how many people will actually take advantage of the LISA as an alternative to effecting a registered pension plan for retirement planning. Of course, if the desire is to get onto the property ladder for the first time, the LISA will be a more popular choice.

For "ordinary retirement savers", while they will be able to make partial withdrawals if those withdrawals occur before age 60 they come with a sting in tail as the government bonus will be lost - including any interest or growth on that bonus and a 5% charge will apply.

How attractive a LISA will be will therefore depend on the circumstances and requirements of the investor.  It will clearly be attractive for the would-be first-time buyer who is 40 or under.

It will also be attractive for the person under 40 who wishes to save until age 60 - but in the knowledge that if all else fails they can get their money back before then at any age - albeit suffering the penalty of the loss of the government bonus, growth thereon and a 5% charge.

For the "retirement saver", who is under age 40 and a higher rate taxpayer, a pension plan will still appeal - at least under the current rules. This is effectively the case as access at age 55 is now available without the requirement to purchase an annuity but, of course, 75% of the fund will be taxable - which is not the case with the LISA at age 60.


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The Lifetime ISA versus the Help To Buy ISA   

The previous article provides an overview of the Lifetime ISA and its features.

Here we provide a quick summary of the Lifetime ISA compared to the Help to Buy ISA.


Lifetime Isa


Help to Buy Isa


From April 2017 onwards

From 1 December 2015 to 30 November 2019



Savers have to be under age 40 at April 2017 - so it is possible to open an account if between the age of 18-39 and UK resident


Available to first-time buyers aged 16 or over who are UK resident

Aim of the product

To help under 40s save for a first home or retirement

To help first-time buyers save a deposit for their first home



Type of ISA

Cash/stocks and shares


Individual contribution

Maximum of £4,000 a year - no monthly cap - until the saver turns 50. Max over a lifetime £128k (i.e from age 18-50).


£200 a month, plus a further £1,000 on account opening up to a maximum limit of £12,000

Government bonus




Max government bonus

£1,000 a year from age 18 until the saver turns age 50 (i.e a cap at £32k)


£3,000 total

Bonus paid

At the end of the tax year but can be paid in-year when a home purchase is made


When the saver purchases a home

Max time account can be open and contributed to

Savers can open an account between the ages of 18 and 39 but the bonus will only be paid on contributions made until they turn 50 - a maximum of 32 years' contributions. The government will consult on allowing further contributions past the age of 50 that would not qualify for a government bonus


Until the account balance reaches £12,000 (including interest). This would take a minimum of four years and seven months of contributions, excluding interest. Accounts can be opened until 30 November 2019 and contributed to until 2029

Maximum property value your savings can be used to buy


£450,000 - restricted to UK residential property

£250,000 rising to £450,000 in London

Transfers in from previous years' ISAs?


No - except for the 2017/18 tax year only, a Help to Buy ISA (including the government bonus) can be transferred into the Lifetime ISA


Full withdrawal conditions

There will be an initial minimum holding period of 12 months from account opening before withdrawals, that include the government bonus, can be made for a home purchase or retirement. If used for a home purchase, withdrawal must be paid to conveyancer. Where people are diagnosed with terminal ill health, they will be able to withdraw all of the funds


You can withdraw money at any time but you can't replace it straight away. For example, if you deposit £200 and then withdraw £50 in the same month, you will have to wait until the next month to make another deposit. No fee for withdrawal but loss of bonus

Partial withdrawal conditions

Savers can make partial withdrawals but will lose the government bonus (including any interest or growth on that bonus) and a 5% charge will apply


No withdrawal fee but loss of bonus




Government response to the consultation on regulations to simplify automatic enrolment processes 

On 10 March 2016, the Department of Work and Pensions, published the government's response to their earlier is consultation on proposed technical changes to auto enrolment that are designed to simplify the employer burden, especially now small and micro employers are reaching their staging dates.

There were 25 formal written responses made to the consultation and those were broadly supportive of the aims of the regulations with respondents agreeing that they would reduce burdens on employers.

The resultant Occupational and Personal Pension Schemes (Automatic Enrolment) (Miscellaneous Amendments) Regulations (SI 2016/311) have been laid before parliament on 10 March and come into force on 6 April 2016.

The main changes following on from the consultation outcome that will be of interest to financial planners include:

  • Exceptions to the employer duty:
  • Company Directors
  • Limited Liability Partnerships (LLPs)
  • Tax Protected Status
  • Winding Up Lump Sums (WULSs)
  • Compliance easements:
  • Re-declaration
  • Early Automatic Enrolment - bringing your staging date forward
  • Early staging date
  • A transitional easement for certain formerly contracted-out salary-related schemes

We will consider these in turn.


Exceptions to the employer duty

Pensions Act 2014 gave powers to the Secretary of State to prescribe exceptions to the employer duties to automatically enrol individuals in certain instances. Three exceptions had been introduced with effect from 1 April 2015 for individuals:

  • with tax protected status for existing pension savings (i.e. enhanced or fixed protection);
  • who have given or been given notice of termination of employment; and
  • who cancel membership of a qualifying scheme or opt out before automatic enrolment.

Two more groups of individuals are now being added to the exceptions from 1 April 2016:

  • company directors; and
  • genuine partners in Limited Liability Partnerships (LLPs).

Company Directors

Already directors who didn't have a contract of employment were outside the scope of auto enrolment. However, from 1 April 2016, it will no longer be an employer's duty to automatically enrol or re-enrol a jobholder who is a director of the company by which that jobholder is employed. It will instead be discretionary and the individual will still have the same rights as any jobholder to enrol and benefit from the normal contributions.

Genuine Partners in Limited Liability Partnerships

Following a recent Supreme Court decision in Clyde & Co LLP v Bates van Winklehof that self-employed LLP members can be "workers" as defined in Employment Law and so could also be subject to the automatic enrolment duties an exception is being created that will apply to "genuine" partners in a LLP.

The exemption is based upon HMRC's Salaried Members Rules as a basis for determining whether a member of an LLP is a genuine partner as opposed to an employee. The HMRC Guidance and technical Note can be found here. The Salaried Member provisions are intended to apply to those members who are more like employees than partners in a traditional partnership, in order to address the existing inconsistency in the ways that LLPs and general partnerships are treated for tax purposes.

The new exemption is for those members of a LLP who are not treated for income tax purposes as being employed by the partnership, i.e. genuine LLP members.


Tax Protected Status

In short, this extends the existing exceptions, from 6 April 2016 that apply to individuals with enhanced protection, fixed protection and fixed protection 2014, to those with fixed protection 2016.

Advisers need to be aware, that whilst provisional elections for FP16 can be made as soon as a client wishes after 6 April 2016, the full election can't be made until towards the end of July. Also there is of course no time limit for making an election.

Some clients may decide to suspend contributions in the short-term with a view to reviewing whether to elect for FP16 or not in the next couple of years. This exception will of course not apply to them until they have elected for FP16. They will still have to reply on the statutory 30-day opt-out period. This will apply not only to individuals who haven't reached their employer staging date, but also those falling under the three-year re-enrolment requirements.


Compliance easements; reducing complexity for employers

As these will have only limited interest for Financial Planners, they will only be briefly summarised.  The new regulations make the following changes:

  • The requirements for employers, who wish to bring forward their staging date, are simplified so that where the employer has no eligible jobholders to automatically enrol, they no longer need to seek the agreement of a pension scheme to bring forward their staging date;
  • The measures remove the requirement for employers to give the Pensions Regulator one month's notice of their intention to bring forward their staging date so that notice can be given at any point up to and including their new early automatic enrolment date;
  • Employers, without anyone to enrol, can now bring forward their staging date to any date, between today and their original staging date, and are no longer restricted to a 1st of the month date;
  • The measures align the timeframes for re-declaration, regardless of whether an employer has eligible jobholders. Employers without anyone to re-enrol are now treated in the same way as employers with eligible jobholders, so that they need only provide information to the Regulator within 5 months of the third anniversary of their original staging date; and then, broadly, at 3 year intervals from their last re-enrolment date.


A transitional easement for certain formerly contracted-out salary-related schemes

Employers using defined benefits schemes for their automatic enrolment duties have been able to demonstrate scheme quality by the existence of a valid contracting-out certificate. However, from 6 April 2016, employers offering defined benefits schemes will no longer be able to contract their employees out. To ensure that their schemes qualify for automatic enrolment, employers would then have to use the Test Scheme Standard or the alternative quality requirements for defined benefits schemes.

The Government expected that most using the alternative quality requirements will apply a test based on the cost of the future accrual of benefits provided by the employer for the active scheme members.  For a transitional period only, the employers of schemes that satisfy the contracting out conditions on 5 April 2016, and who have not changed the benefits in their schemes, will be able to apply the cost of accruals test at scheme level.

This easement will be available until the earlier of two dates:

  • either the date that the actuary signs the first report after 5 April 2016 that breaks the cost of accruals down to benefit scale level, or
  • 5 April 2019.

The easement will obviate the need for employers to commission or undertake nugatory work to demonstrate that their scheme qualifies to be used for automatic enrolment.


Financial Assistance Scheme to close to new schemes from September 2016

The Pension Protection Fund has announced that the Financial Assistance Scheme will close to Notification and Qualification of new schemes from 1 September 2016. 

Trustees, advisors, former trustees and/or former advisors of any pension scheme they believe may be a qualifying scheme not yet notified to FAS should do so as soon as possible. Members currently receiving, or with a deferred entitlement to receive, assistance payments from the Financial Assistance Scheme are not affected by this announcement.

FAS was established to help people who have lost out on their pension because:

  • they were a member of an under-funded defined benefit scheme that started to wind-up between 1 January 1997 and 5 April 2005, and
  • their scheme began to wind-up (ended) and did not have enough money to pay members' benefits, and
  • the employer could not pay the shortfall because of insolvency, has ceased to exist or has not met its commitment to pay its debt to the pension scheme, or
  • the scheme started to wind up after 5 April 2005 but was ineligible for help from the Pension Protection Fund due to the employer becoming insolvent before this date. 


Not already a member?

Members get access to a range of benefits, including quality CPD and discounts on CII exams.