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My PFS - Technical news - 18/08/2015

Personal Finance Society news update from 29 July 2015 - 11 August 2015 on taxation, retirement planning, and investments.

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Taxation and Trusts

Investment planning

Retirement planning

Taxation and trusts


Strengthening sanctions for tax avoidance - Consultation on detailed proposals

(AF1, RO3)

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 avoiders.

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

(AF1, RO3)

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 the topic.

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) Bill.

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 2020

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 2020 are:

  • 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 2016.

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 2016

(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 £10,000.

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 business.

The EU Succession Regulation - New cross-border rules

(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 States.  

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 that date. 

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 asSpain,FranceorItaly.

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, unless:-

  • the deceased was manifestly more closely associated with another State (which will be decided on a case by case basis), or
  • the deceased elected in their will for their national law to apply.

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 later.

The practical implications of the above are as follows:

UK habitual residents with property in another EU State

(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 specifically excluded.

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 etc. 

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 practice. 

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 legislation anomaly

(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 multiple trusts

(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 2017.

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 honestly.

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 Appeal

(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 circumstances.

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 state benefits.

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 alternative.


Investment planning

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 retail outflow.

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 inflow.

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 businesses

(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 published.

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 enrolment providers.

Lesley Titcomb, chief executive of The Pensions Regulator, said:

"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 including NEST.

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 enforcement bulletin

(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 backdated.

The main numbers in this Bulletin are:



# in period

Total to Q2 2015

Information Notice

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 Act 2004




The power to search premises and take possession of content under section 78 of the Pensions Act 2004



Compliance Notice

A Compliance Notice under section 35 of the Pensions Act 2008 to remedy a contravention of one or more automatic enrolment employer duty provisions



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 pension scheme



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 Accounts.

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 before.
  • However, the makeup of claims was significantly different year-on year.
  • 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 complexity.
  • 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 £11,104.

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 alike."

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.

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