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Welcome to the latest updated version of The Guide for Pension Trustees – January 2018

The Guide for Pension Trustees aims to keep its readers up to date with changes in legislation and regulation, and with developments in practice, that affect pension trustees and others concerned in the management of pensions.

Apart from continuing general updating and tidying, there have been a few specific updates made to The Guide since the last update, reflecting changes that have occurred over the period.

New items covered in The Guide

The period has been quieter than expected, particularly in respect of the Westminster government's autumn Budget. For the first time in many years, there were no substantive changes announced to the tax treatment of workplace pensions. The only announcement was the confirmation of the increase in the Lifetime Allowance by 3%, to reflect current inflation, applying the statutory formula already legislated for. Consequently, the figure for 2018/19 will be £1,030,000. Meanwhile, the proposed reduction in the Money Purchase Annual Allowance (the reduced Annual Allowance applicable to a member who has taken some of their pension benefits) has finally been effected, backdated to 6 April 2017 after the enabling legislation was deferred due to the 2017 General Election [see 23.2.11 (Note)].

The Scottish government, in its Budget on 14 December 2017, announced changes to the rates of income tax for those registered as Scottish taxpayers. This is the first time that the income tax rates for Scottish taxpayers have diverged from those for the rest of the UK’s citizens and underscores the legal requirement for schemes to keep a record of those members who are Scottish taxpayers, identified by HMRC with an ‘S’ designation [see 10.1.1(a)].

There have been a few developments of note, which affect areas covered by The Guide and which have been incorporated.

‘Good’ methodology for actuarial valuations

In response to continued concern about funding levels in DB schemes The Pensions Regulator is aiming to become ‘increasingly clear’ as to which methods it regards as ‘good’ for use in actuarial valuations. This assessment is consistent with Technical Actuarial Standard 300: Pensions (TAS 300) published earlier in 2017 by the Financial Reporting Council. [See new 15.1.5, 6 and 7]

Investment implications of ‘freedom’ and ‘choice’

Growing attention is being paid to the challenges of investment strategy in DC schemes in a world where freedom and choice give such a wide range of options to a member, from age 55 onwards. The issue is gaining in importance as it affects greater numbers of members. This is now reflected in new wording in The Guide. [See 18.5.10]

The trustee chair’s annual statement – DC schemes

The importance of the annual statement by the trustee chair of a DC scheme has been underscored by the levying of fines by The Pensions Regulator in cases where a report has not been produced (a compulsory penalty, over which the Regulator has discretion only concerning amount). To help trustee chairs in the production of a good statement, the Regulator has produced a quick guide. [See 12.3.13 (Note)]

Social Investment

Schemes are facing increased pressure to take social issues into account to varying extents when investing their funds. There have been a number of developments in this area recently, and The Guide has been updated to refer to these. [See 18.2.6 (Note)]

Risk warnings to members wishing to transfer accrued benefits out of a DB scheme

The growing interest by members of DB schemes in transferring their benefits out and thereby affecting any protective guarantees has prompted the need for a comprehensive system of warnings to be provided to potentially affected members. The Department for Work and Pensions (DWP) has published a guide which includes information on the personalised risk warnings system. [See 17.4.1 (Note)]

I hope you find the updates useful.

Kevin LeGrand

If you have any questions about this Update, please contact the Helpdesk on 0800 980 1332, or email GPT-Online@pendragon.co.uk.







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