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My PFS - Technical news - 30/11/2015

Personal Finance Society news update from 18 November 2015 - 01 December 2015 on taxation, retirement planning, and investments.

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Taxation and Trusts

Investment planning

Retirement planning

Taxation and trusts

Woman convicted for faking the witnessing of testator's signature
(AF1, RO3, JO2)

A 74-year-old Derbyshire woman, who persuaded two people to 'witness' the signature of her deceased cohabitant after his death in order to allow her to prove his will, has been given a 12-month jail sentence suspended for two years for using a false instrument in order to deceive. 

Ms Lovelock had lived with Norman Meakin for many years in a home owned by him. Although Ms Lovelock owned her own home, Mr Meakin had allegedly promised Ms Lovelock that she could remain in occupation of his property for life.

Following his death in September last year, Mr Meakin's family presented a will to Ms Lovelock which provided that the estate should be divided between five relatives and Ms Lovelock in equal shares. However, Ms Lovelock indicated she had recently discovered another will which allowed her to remain living at the address where she lived before his death, until her death.

Although the second document was accepted by the Court as one that Mrs Meakin had genuinely signed, the evidence revealed that the two witnesses, who had supplied signatures confirming they saw Mr Meakin sign the will, had not written their names on the document until after his death.

Summing up, Recorder Michael Stephens said "Where things have gone wrong are: after he passed away you wrongly took it upon yourself to get it signed so that the will could be seen as a valid document and I believe you knew you were doing something wrong there." "You got two vulnerable, naive people to sign that document. I think you took advantage of their good nature."

This case highlights the importance of ensuring that the proper formalities are observed when executing a will in England and Wales - especially in cases where the intended beneficiary is not legally married to the testator. Unless the will has been signed in the presence of two witnesses (who have also signed the will in the presence of the testator), it will not be valid - even if there is evidence that the testator intended the document to be their last will.

The Finance Bill 2015-16 has received Royal Assent
(AF1, AF2, AF3, AF4, RO2, RO3, RO4, JO2, JO3, JO5, CF2, CF4, FA2, FA4, FA5, FA7)

The Finance Bill 2015-16 received Royal Assent on 18 November 2015 and can be found here.  It is called The Finance (No.2) Act 2015.  The Finance Bill 2015-16 was also referred to as the Summer Finance Bill 2015.

The Finance Bill Finance Bill 2015-16 - full text of the Bill as published on 15 July 2015.

Summer Finance Bill 2015 - Explanatory notes and guidance published on 15 July 2015.

Summer Finance Bill 2015: Measures with immediate effect - listing of measures already announced in July 2015.

Investment planning

October inflation numbers
(AF4, CF2, RO2, FA7)

Annual inflation on the CPI measure remained negative in October, with the rate remaining at September's -0.1%. The October inflation numbers from the Office for National Statistics (ONS) were in line with market expectations, which means that the CPI has been in a band between +0.1% and -0.1% for the last nine months.

The CPI showed prices rising by 0.1% over the month, the same as between September and October 2014. The CPI/RPI gap narrowed by another 0.1% this month, with the RPI falling by 0.1% to 0.7% on an annual basis. Over the month, the RPI was flat, marginally bettering the CPI.

The unchanged CPI annual rate was due to "a number of offsetting upward and downward contributions", according to the ONS:


Clothing and footwear: Overall prices rose by 2.0% between September and October this year compared with a rise of 0.6% between the same two months a year ago. The ONS says that clothing prices "provided the largest contribution to change in the CPI 12-month rate in either direction" and the monthly increase was the largest for September to October since official records started in 1996. Last month saw clothing and footwear as a major downward contributor, due to extended summer sales, so the latest figure evens things up. The monthly gyrations obscure the fact that year-on-year clothing and footwear inflation is 0.8%.

Recreation and culture:Overall prices rose by 0.8% between September and October this year compared with a 0.4% increase between the same two months a year ago. The upward contribution came from price movements for a range of recreational goods, most notably computer games and consoles.


Education:  Overall prices rose by 3.6% between September and October this year compared with a rise of 7.9% between the same two months in 2014. The downward contribution came principally from UK and EU student tuition fees: the impact from the rise in the cap for tuition fees (first introduced for new students in England in 2012) was smaller this year than in 2014. The was because only the fees for four year courses rose to new higher rates in 2015 compared with fees for three year courses rising a year ago, together with the fact that there are fewer fourth year than third year students. The distorting effect of the hike in tuition fees will now drop out of the October inflation figures - at least until the next reform of student funding. In any case, education is the smallest but one component of the CPI, accounting for only 2.6% of the index.

Food and non-alcoholic beverages: Overall prices fell by 0.4% between September and October this year against a rise of 0.1% in the same period a year ago. The downward contribution came from price movements for a wide range of foodstuffs, partially offset by upward contributions from price movements for some confectionary. The latest figures continue the trend of negative food inflation seen over the last 18 months and leave the annual pace of food price inflation at -2.7%.

Alcoholic beverages and tobacco: Overall prices fell by 0.4% between September and October this year compared with a rise of 0.6% between the same two months a year ago. The downward contribution came from wine, spirits and tobacco. This is the first time that prices have fallen in this sector between September and October since 2009 and the largest fall between the two months since official records began in 1996. A Chancellor looking for money to fund tax credits may take note…

Core CPI inflation (CPI excluding energy, food, alcohol and tobacco) was an annual 1.1%, up 0.1% from the previous month. Three of the twelve components of the CPI index are now in negative annual territory, one fewer (clothing and footwear) than last month. Another way of looking at how underlying prices are going is that the ONS statistics show annual inflation for goods is running at -2.1%, while that for services is +2.2%.

The October inflation numbers help to justify the Bank of England's dovish stance, revealed a fortnight ago. They may also ease the Chancellor's options in coping with the £4bn hit to tax credit reductions he must deal with in the Autumn Statement. As suggested above, he could afford to push up some 'sin taxes' without threatening inflation problems.


The costly triple lock
(AF3, RO4, CF4, JO5, FA2, RO8)

News reports at the weekend revealed that the basic state pension will rise by 2.9% (£3.35 a week) from April 2016 to £119.30. The rise is the result of the earnings element of the triple lock biting for the first time. CPI inflation to September 2015 was -0.1% and the third element of the triple lock, the floor of 2.5%, was beaten by resurgent earnings growth.

Why the news came out at the weekend, ahead of the Autumn Statement, is interesting to ponder. One important factor may be that an increase in the basic state pension sits uncomfortably with a freeze for most other benefits (due to that negative CPI) and the planned, but now to be reworked, reductions in tax credits. The basic state pension is forecast to account for £68.4bn of government expenditure in 2015/16, according to the DWP. Thus the 2.9% increase will add about £2bn to next year's government spending bill. That is close to half of the amount that was going to be clawed back via tax credit cuts before the House of Lords intervened.

The increase in the basic state pension should mean (subject to any Autumn Statement surprises) that the standard minimum guarantee will also rise by £3.35 a week, to £154.55 for a single person. If past precedent is followed, the follow on from that is the single tier pension will start life next April at £154.60 a week, 5p a week more than the guarantee. The additional and graduated state pensions are CPI-linked and so will remain unchanged in April.

The 2.9% increase highlights what Paul Johnson, director of the Institute of Fiscal Studies, recently described as "a bizarre degree of randomness [in] the future level of state pensions which will depend not on overall increases in prices or earnings but on the timing of those rises". Linking increases to earnings alone - as was the case before 1980 - is a more logical approach as it ought to mean growth in the cost of state pensions is more closely related to growth of the UK economy. Under the triple lock system, there is an effective ratchet in economic downturns, as the last few years have made all too clear. The OBR reckons that that the continuation of the triple lock would add well over 1% of national income (say £20bn in today's terms) to pension spending by the middle of this century, relative to the cost of pure earnings indexation.

HMRC publishes countdown Bulletin No 11
(AF3, RO4, CF4, JO5, FA2, RO8)

HM Revenue & Customs (HMRC) has published the 11th issue of its "Countdown Bulletin to the end of Contracting-out", which is an adhoc bulletin covering scheme cessation and answers to queries raised at the pension conferences earlier in 2015. 

In this edition they cover: 

1) Pension Forums

Pension forums are being offered around the country during December 2015 to help schemes plan for the end of contracting out and ongoing GMP service plans.Contact:
to register interest.  

2) GMP Service testers

From April 2016 HMRC will no longer issue these statements or data files for any member who leaves, transfers, dies or claims/reaches SPA on or after 6 April 2016.

This means that schemes need to use the GMP Service to obtain a GMP calculation.

More testers are required to make sure the new GMP service runs properly.

Testers are required who currently:

  • request GMP calculations
  • deal with the statements/data files when a member retires or when a transfer takes place
  • receive data files and who upload them on to their systems


3) Reconciling active membership records

In December 2016 HMRC will automatically close the records of approximately 6.2 million individuals who are still in contracted-out employment on 5 April 2016. Details of these scheme memberships will then be available to Pension Scheme administrators to reconcile against their own records.     

HMRC will work with Pension Scheme administrators until 31 December 2018 to complete this reconciliation. A short survey has been created to obtain your views on the reconciliation process. Survey closes 30th November 2015.

4) Customer Relations team mailbox

The customer relations team now has a designated email address. The email address is:

5) Contact details

If the enquiry relates to their contracted out pension or National Insurance contributions (NIC) the contact details are as follows:

  • Telephone: 0300 200 3507 (for contracted out enquiries)
  • Telephone: 0300 200 3500 (NIC enquiries)

The address is for enquiries from Pension Scheme administrators and trustees only.

Latest news from The Pensions Regulator
(AF3, RO4, CF4, JO5, FA2, RO8)

The following is brief roundup of the most recent announcements in the pensions arena from The Pensions Regulator (TPR).

1. Helping you meet new DC governance standards

Find out what trustees and administrators need to do to meet requirements around DC governance standards in TPR's latest video.

The standards came into force in April 2015 and every year trustees will have to describe in their chair's statement how their scheme is meeting them, so it is important that trustees and administrators know what the requirements.

2. New trustee landscape research

New research carried out by OMB Research on behalf of TPR in respect of the trustee landscape reveals findings on the skills and knowledge of pension scheme trustees and their boards in the context of major industry reforms.

This research is part of ongoing work by TPR with the industry to consider what more can be done to improve outcomes for savers and clarify duties for those running or supporting schemes.

3. Independent assurance for another master trust

The National Employment Savings Trust (NEST) is the latest occupational DC master trust to obtain independent assurance.

The voluntary assurance framework was developed by the Institute of Chartered Accountants of England and Wales (ICAEW) in association with the regulator to support auditors to provide independent assurance reports for the trustees of master trusts.

In addition, NEST has been added to 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. This list currently includes the following the following schemes:

  • National Employment Savings Trust (NEST)
  • The People's Pension
  • NOW: Pensions
  • Welplan

4. New government consultation

The Department for Work and Pensions has launched a consultation 'Better Workplace Pensions: Banning member-borne commission in occupational pension schemes'. The consultation runs until 27 November.

The government would welcome responses from, among others, trustees and their advisers and those who provide services to occupational pension schemes.

5. Workie says: 'Don't ignore the workplace pension'

A new character was introduced last month with the launch of a campaign which aims to change the country's perception of pensions in the workplace.

'Workie' will be seen visiting people in all sorts of work environments over the coming months, asking them not to ignore him.

While automatic enrolment into workplace pensions has been rolling out across the UK since 2012, it is only now that up to 1.8 million small and micro employers are being required to take action to help their staff to save for later life

6. Latest automatic enrolment numbers

TPR's latest quarterly report on automatic enrolment provides information about our cases and the powers we have used relating to automatic enrolment and associated employer duties. This report also includes lessons learned from some recent Tribunals.

Between July and September this year TPR issued:

  • Compliance notices: 469
  • Unpaid contributions notices: 85
  • Fixed penalty notices: 107
  • Escalating penalty notices: 2

7. New interactive web journey launched for small and micro employers

To help reduce the challenge of automatic enrolment for small employers, TPR recently launched a new interactive step-by-step online guide.

It's designed to meet the specific needs of these employers who may not have pensions experience, including those with just one or two members of staff.

The guide provides clear and accessible information for employers on what to do, and by when, using videos, animations and infographics.


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