Pensions update: Investments, DC schemes and more

Pensions

 

• The Government says no intervention necessary in pension investments affected by COVID-19
• HMRC: Not all DC pension scheme qualify for VAT exemption
• FOS: Annual complaints data
• Re-employment in response to coronavirus outbreak – Protected pension ages
• TPR publishes blog on COVID-19 challenges for trustees
• DB schemes present the greatest data challenge for the pensions dashboard
• PLSA seeks views on climate risks
• MaPS launches Advisory Group

 

 

The Government says no intervention necessary in pension investments affected by COVID-19

(AF3, FA2, JO5, RO4, RO8)

The Government has said that it does not believe that “proportionate interventions” are necessary at this time in pension investments affected by the COVID-19 pandemic. A written question [47499] from Labour MP Rachel Hopkins asked whether the Government planned to provide extra support to people with private pension arrangements that have been affected by the current crisis. In response, Economic Secretary to the Treasury John Glen said: “We have already introduced a range of measure[s] to support businesses and individuals, ensure financial stability and reinforce social safety nets. We recognise that the value of investments may have fallen, including those held in private pensions. However, investments are for the long term and the Government does not believe there are proportionate interventions to be made at this time.”

HMRC: Not all DC pension scheme qualify for VAT exemption

(AF3, FA2, JO5, RO4, RO8)

HMRC is warning in its recently issued guidance that not all DC schemes will fall within the definition of “qualifying pension fund” for which regulations issued in March provide that certain supplies made to such funds are VAT exempt.

In its recent update to the HMRC VAT Finance Manual page VATFIN5120 states that “Given the principle that VAT exemptions must be construed narrowly, it will be HMRC’s working assumption that a pension fund does not meet all the criteria ... and will therefore not be a qualifying pension fund”.

Not all DC schemes will be able to meet the criteria for exemption; for example, those that do not contain the pooled contributions of more than one member will not qualify.

Furthermore, even if a DC scheme does have the status of a qualifying pension fund it does not mean that all services to it will automatically become exempt.  To be exempt services must be necessary for the management of the fund.  There are significant areas of doubt concerning what counts as an exempt management service, and as such, those providing services to a “qualifying pension fund” may need to take advice.

FOS: Annual complaints data

(AF3, FA2, JO5, RO4, RO8)

The Financial Ombudsman Service (FOS) has published annual complaints data for the 2019/20 period. PPI remained the most complained about product, but overall FOS received fewer complaints than in the 2018/19 financial year.

As far as pensions were concerned, the most complained about were SIPPs (2,606). FOS stated that they have worked closely with the FCA to address concerns raised by and on behalf of members of British Steel’s pension fund. Their executive team and The Ombudsmen taking part in several local events in Port Talbot to speak to those affected, as well as to local financial advisers. They also went to Scunthorpe and attended an event in Parliament with MPs and steelworkers. However, complaints from former British Steel Pension Scheme (PSPS) members, or about DB transfers in general have not yet appears in the FOS headline figures. Whether that will change with the FCA writing to the 7,700 former BSPS members remains to be seen.

Re-employment in response to coronavirus outbreak – Protected pension ages

(AF3, FA2, JO5, RO4, RO8)

On 22 April 2020 John Glen MP made a written ministerial statement to confirm that the Government intends to temporarily suspend tax rules that would otherwise apply significant tax charges to pension income received by recently retired individuals aged between 50 and 55. In line with this statement, if the nature of the employment is to undertake work in relation to the COVID 19 outbreak, then HMRC confirms that it accepts that the re-employment conditions have been satisfied.

This means that any payments made to those that would otherwise have been unauthorised payments will not be treated as such.

In an update to pension scheme newsletter 119 it was confirmed that this easement was being extended until 1 November 2020.

TPR publishes blog on COVID-19 challenges for trustees

(AF3, FA2, JO5, RO4, RO8)

The Pensions Regulator (TPR) has published a blog entitled “COVID-19: Transfer Your Attention”, which considers the unprecedented challenges to pension trustees that have arisen as a result of COVID-19 and provides advice on DB and DC transfers and pension scams. In the blog, Charles Counsell, TPR Chief Executive, says: “In times of volatility and disruption it’s all the more important savers understand a pension remains a good, long-term investment, just as they would need to be confident about any other big investment, such as buying a house. If they lose confidence it may make it more likely they may make knee-jerk decisions about their money which may not be in their best interests. If we take the time necessary to protect and prioritise what’s important together, we’ll keep savers on a securer footing.”

DB schemes present the greatest data challenge for the pensions dashboard

(AF3, FA2, JO5, RO4, RO8)

The Society of Pension Professionals has published a short report “Progressing the pensions Dashboard” covering a number of aspects of the provision of information to the Pensions Dashboard. Unsurprisingly, one of the key findings relates to the challenges of incorporating DB scheme benefits into the dashboard output.

SPP members believe that 80% of DB schemes and 40% of DC schemes are not currently in a position to provide an “estimated retirement income” to the dashboard – a vital piece of information in order for the dashboard to provide meaningful assistance to pension savers.  And whilst 69% of SPP members thought that only a limited amount of work would need to be done for DC schemes in order that they could provide this information, 70% of SPP members thought that a significant amount of work would be required for DB schemes.

The report concludes that schemes need sufficient clarity on data expectations as well as a realistic period of time to implement the final data requirements, once known.  SPP members believe that it could take up to two years for DC schemes and three years for DB schemes to be able to provide all the proposed basic information data to dashboards in an electronic format.

PLSA seeks views on climate risks

(AF3, FA2, JO5, RO4, RO8)

In a Press Release, the Pensions and Lifetime Savings Association (PLSA) is inviting pension schemes, the wider financial services industry, the public and stakeholders to give their views on practical ways the retirement savings sector can address climate risk. PLSA Chair Richard Butcher will lead a series of online roundtables from 12 June and the PLSA is also inviting all interested parties to submit evidence and views via the PLSA website until 14 August. Mr Butcher said: “As stewards of trillions of pounds of people’s savings, pension schemes have a duty to ensure that members’ money is managed responsibly. The PLSA is rightly proud of its efforts to encourage the pension industry to prioritise climate risk to date. With the engagement this work has brought, and new climate regulations in force, I am excited to be getting the opportunity to discuss with scheme CEOs, CIOs, trustees and anybody else to turn enthusiasm into action and take the agenda further.”

MaPS launches Advisory Group

(AF3, FA2, JO5, RO4, RO8)

In a Press Release, the Money and Pensions Service (MaPS) has announced the launched an advisory group called; “Guardians of Financial Wellbeing” to provide long-term support for its UK Strategy for Financial Wellbeing and future Corporate Strategy. The group, called which held its first meeting yesterday, will help to ensure that MaPS is able to deliver on the five “agendas for change” outlined in its UK Strategy for Financial Wellbeing (see Pension Research and Survey Data to 24 January 2020). MaPS said that it is also investing “additional time” to explore how the immediate and longer-term impacts of the COVID-19 outbreak should be addressed.

Sir Hector Sants, Chairman of MaPS, said: “The current crisis has highlighted the precarious nature of many people’s financial resilience and through that financial wellbeing. There is virtually no-one in the country who hasn’t felt some economic impact as a result of the outbreak. Improving financial wellbeing — to help people feel more empowered and in control — would make a big difference. We have already been joined by many excellent collaborators from a wide range of sectors and I'm delighted at the list of leaders in their fields who have now agreed to join the new advisory group. The Board of MaPS looks forward to working with them to ensure the UK Strategy for Financial Wellbeing delivers on its great potential in the years ahead.”