Pensions a glance

Transcription

1 16 April 2009 Pensions a glance is a free monthly publication from the Pinsent Masons Pensions Group. It is a quick reference guide giving you the latest position on the main pension reforms currently proposed. The most recent developments appear in bold and italic text. If you would like more details please contact your usual Pinsent Masons adviser or us on pensionslaw@pinsentmasons.com. Do forward this publication to your colleagues or let us know their address to receive a copy direct. Key to symbols Home and dry Limping home Legislation or reform promised and in force - but may still be subject to further change! Legislation or reform still in the pipeline Sunk without trace Legislation or reform that never really got going or that has been abandoned On hold Legislation or reform on hold Occupational pension issues 1 Age discrimination Prohibits direct and indirect discrimination on grounds of age. Employment and Race Directives The new legislation came into force in October 2006, but the part relating to pension schemes was postponed until 1 December In July 2008 the European Court of Justice heard Heyday s challenge to the default retirement age of 65. The ECJ ruled that a compulsory retirement age of 65 is not in breach of EU legislation in March The UK High Court must now decide if the age limit is justified. A consultation paper on flexible retirement was published in October In December 2008, the Government published draft regulations which proposed two alternative new exemptions relating to flexible retirement. It has also announced that it intends to bring together interested parties to produce guidance on flexible retirement. In force - 1 December 2006

2 2 Anti-avoidance Increase Regulator s antiavoidance powers The Pensions Act 2004 gave the Regulator the power to issue Contribution Notices and Financial Support Directions. In November 2008, the Pensions Regulator published a draft set of circumstances under which it expects to impose a contribution notice under the new material detriment test. The Pensions Act 2008 has implemented the changes. A draft Code was published in December Regulations came into force on 6 April 2009 which gradually increase the lookback period for financial support directions to 24 months. 3 Financial Assistance Scheme Gives further protection for members of schemes which are underfunded or insolvent. Announced in 2002 Green Paper. Implemented by Pensions Act The Government announced in December 2007 that FAS will be increased to broadly equivalent levels to the PPF. Regulations came into force on 27 March 2009 which extend the ill-health provisions to people with significantly reduced life expectancy who do not qualify under the terminal illness provisions. Draft regulations on the outstanding changes announced in December 2007 were published in February Further consultation covering the transfer of pension scheme assets to FAS is expected later this year. Guidance was published in March 2009 for trustees of FAS qualifying schemes. 4 Investment - Myners Review Myners investigation into UK institutional investment concluded that trustees were not adopting a sufficiently risky strategy. Treasury issued Myners' code in final form in October In April 2008 the Government launched a consultation on updated principles, taking account of the NAPF s recommendations and proposing a new Investment Governance Group chaired by the Pensions Regulator. In October 2008, the Government published its response to the consultation. That paper confirmed the Government s intention to establish the Investment Government Group.

3 5 Pension Increases and Revaluation Deregulatory Review published in July The Pensions Act 2008 reduced the revaluation cap to 2.5%. Regulations which came into force on 6 April 2009 will allow trustees to amend their scheme rules by resolution to reduce the scheme's revaluation cap and annual rate of increase to pensions in payment. Employer issues 6 Communications Simplifying the requirements for disclosure and trustee reporting and record keeping The Government announced, in its response to the Deregulatory Review, that it will introduce principles-based disclosure legislation. Consultation is still expected, with the aim of introducing new legislation by A working group in the DWP has concluded that this approach is not appropriate. The DWP is examining how to reduce disclosure costs. 7 Contracting Out (1) GMPs (1) Promised simplification (2) Clarity on GMP equalisation requirements. (3) Bulk transfers and former contracted-out scheme Pickering identified methods of simplifying GMPs and encouraged Government to assist on equalisation. The Pensions Regulator published winding up guidance in June The Regulator (like its predecessor, Opra) has refused to take a stance on whether GMPs must be equalised, but has recommended that trustees take a pragmatic and proportionate approach. According to a revised Memorandum issued by the Board for Actuarial Standards by 1 September 2009 statutory money purchase illustrations will reflect future abolition of money purchase contracting out. Regulations came into force on 6 April 2009 allowing schemes to convert GMPs into ordinary scheme pension, subject to certain safeguards. (2) Abolition of contracting-out for DC schemes The Pensions Act 2007 also proposes abolition of contracting out for defined contribution schemes, and paves the way for the rules about accrued protected rights to be varied or abolished. Abolition of contracting out for defined contribution schemes is planned for (3) Bulk transfers Regulations came into force on 6 April 2009 which will allow bulk transfers without consent to be made to former contracted-out schemes.

4 8 Pan-European pensions Contains proposals for cross-border principles on scheme supervision - particularly funding. A Pan- European approach to tax and social security are more complex and will take much longer. Directive published in June The Government published a consultation paper in October 2007 seeking views on whether the current regime allows schemes to operate cross-border. This ties in with the European Commission review of the Directive in early Results of the consultation, published in April 2008, reveal that the Government does not intend to make changes to the UK legislation, although it will seek European Commission advice on some issues. The European Commission has found that the UK legislation governing the tax treatment of contributions to overseas pension schemes is in breach of the European legislation governing the free movement of workers in the EU. 9 Personal Accounts From 2012, individuals will be automatically enrolled into this scheme or their employer s own occupational scheme, with the freedom to opt out. The Personal Accounts scheme will be trust-based, with an annual contribution limit of 3,600 (based on 2005 earnings, uprated). The final Turner Report published 4 April The May 2006 White Paper confirmed Government proposals to establish personal savings accounts. The Pensions Act 2008 governs automatic enrolment for employees over 22 or admittance to employer s own scheme (subject to minimum benefit or contribution safeguards) from Employers will be able to self-certify that their own pension scheme meets the required standard. Some draft regulations setting out some of the details have been published for consultation. 10 Portability Establish right throughout the EU for workers to join a pension arrangement and obtain vested rights within a reasonable time and transfer the entitlement on leaving. European Directive concerning Portability of Supplementary Pension. The European Parliament has issued a report committing to setting minimum standards for access to pension rights and fair treatment of dormant rights, but rejecting the proposal to assist the transfer of pensions. In October 2007 the Commission put forward an amended proposal which took on board many of Parliament s changes.

5 State pension issues 11 Return of surplus Reform rules relating to return of surplus to employer. July 2007 deregulatory review recommended rules be amended to allow return of surplus once scheme specific funding target met with trustee agreement. In September 2008 the DWP circulated an informal discussion paper considering options on relaxing rules relating to return of surplus to employers. The aim is to gauge preferences for the options proposed. 12 Section 75 statutory debt In November 2008, the Government announced an informal consultation on the option not to trigger a debt where the employer remains committed to the pension scheme. The Government issued a further discussion paper on this in December It will issue draft regulations for consultation early in Changes are expected to come into force in October State Pension Reforms S2P replaced SERPS from 6 April Second stage of process will be to replace current calculation with flat rate pension. S2P introduced under CSPSSA. The Pensions Act 2007 provides for S2P gradually becoming a flat-rate weekly topup to the basic state pension (by approximately 2030). Also, the state pension age will gradually rise to 68 from 2046, and the basic state pension will start to increase in line with average earnings rather than prices by the end of the next Parliament. The number of years NICs needed to qualify for the full basic state pension will be reduced to 30 years and initial contribution conditions will be abolished.

6 International pension issues 14 Temporary Agency Workers Will give agency staff many of the same terms and conditions of employment as permanent workers. The final wording of the Temporary Agency Workers Directive was agreed in November The UK Government must implement it by 5 December Pension rights can be excluded. Pinsent Masons LLP 2009 London Birmingham Leeds Manchester Christopher Berkeley Simon Laight Jacqui Timmins Stephen Scholefield christopher.berkeley@pinsentmasons.com simon.laight@pinsentmasons.com jacqui.timmins@pinsentmasons.com stephen.scholefield@pinsentmasons.com This note does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered. LONDON BIRMINGHAM BRISTOL LEEDS MANCHESTER EDINBURGH GLASGOW DUBAI BEIJING SHANGHAI HONG KONG T Pinsent Masons LLP is a limited liability partnership registered in England & Wales (registered number: OC333653) and regulated by the Solicitors Regulation Authority. The word partner, used in relation to the LLP, refers to a member of the LLP or an employee or consultant of the LLP or any affiliated firm who has equivalent standing and qualifications. A list of the members of the LLP, and of those nonmembers who are designated as partners, is displayed at the LLP s registered office: CityPoint, One Ropemaker Street, London EC2Y 9AH, United Kingdom. We use Pinsent Masons to refer to Pinsent Masons LLP and affiliated entities that practise under the name Pinsent Masons or a name that incorporates those words. Reference to Pinsent Masons is to Pinsent Masons LLP and/or one or more of those affiliated entities as the context requires. For important regulatory information please visit: