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What's New in GPT

Welcome to the latest updated version of The Guide for Pension Trustees – May 2019

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.

In the last update I made reference to the pensions aspects of Brexit, in particular the Government’s papers on the impact of a possible ‘no deal’ exit. Of course, as we now know, not only has there not been a ‘no deal’ Brexit, but as yet there has been no Brexit at all. Consequently pensions, along with most other aspects of UK life, continue to be subject to uncertainties about the future. Meanwhile the time and focus of the both the Government and Parliament continues to be on finding a solution to the Brexit impasse, so there are fewer changes being proposed for other areas, such as pensions. In some ways this is a good thing, especially if it reduces the volume of new legislation and regulations, too many of which have bedevilled the industry over recent decades.

Nevertheless there have been developments in other areas, mostly at department and other organisation level, as highlighted below.

GMP equalisation moves forward, slowly

Following the judgment in the Lloyds Bank case, which confirmed the need to equalise male and female guaranteed minimum pensions but did not specify which of several possible methods should be used by trustees, the industry is starting to address the practical issues. Some help is on hand from DWP, which has issued Guidance on conversion methodology which could be employed. It is similar to that contained in a consultation paper published in November 2016, but updated in the light of the Lloyds Bank judgment.

There are also a number of other issues to address, particularly around tax. One of these is the possible breach, leading to a tax penalty, if a person with protected right to benefit from a past higher Lifetime Allowance now receives an addition to their pension as a result of the equalisation of GMP beyond their control. HMRC, DWP and other industry experts have formed a working group to consider these issues and find solutions. [See 1.7.10 of The Guide]

    New standards for professional trustees

    The Pensions Regulator is keen to ensure the highest standards of trusteeship for pension schemes. An increasingly important area of their regulatory focus is professional trustees, whose number and impact is steadily growing. The Professional Trustees Standards Working Group, of which TPR is one member, has published a list of formal standards which it is intended will apply to professional trustees. [See 4.6.9 of The Guide]

    Winding up DC schemes

    TPR is also currently increasing its focus on Defined Contribution pension schemes. One important aspect of running such schemes is bringing them to an end. This is a complex procedure, which requires careful planning and effective execution. The Regulator has produced a number of guides to assist trustees, and has now added further Guidance on the stages involved in the process. [See 16.1.3 of The Guide]

    DB schemes and employer insolvency

    Trustees of Defined Benefit schemes face a number of challenges if their sponsoring employer experiences an insolvency event. In many cases the trustees are then involved in making a claim to the Pension Protection Fund. The experience of the PPF is that this process could be made smoother and faster if trustees were to include this possibility as part of their routine scheme contingency planning.

    To this end the PPF has published a guide for trustees Contingency planning for employer insolvency. [See 16.10.3 of The Guide]

    New PASA guidance

    Scheme data is at the core of effective administration. This is recognised by TPR, which has a strong focus on data quality. The Pensions Administration Standards Association (PASA) has produced guidance for administrators and trustees to help them assess the quality of their data and take any appropriate corrective action. [See 10.1.6 (Note) of The Guide]

    New guidance body gets a new name

    The last update highlighted the fact that the guidance remits of the Money Advice Service (MAS), The Pension Advisory Service (TPAS) and Pension Wise were brought under the wing of a new organisation, temporarily named the Single Financial Guidance Body. That body has now assumed its permanent name, the Money and Pensions Service (MAPS). The Guide has been updated to reflect the new name and contact details. [See 24.3.9 of the Guide]

    FOS compensation limit raised

    The Financial Ombudsman Service (FOS) deals with complaints from consumers against financial firms (insurance, investments, banking, mortgages and credit as well as pension and other related advice). It is empowered to award compensation in appropriate cases. With effect from 1 April 2019 the maximum compensation it can award has been doubled, to £300,000. [See 24.6.13 of The Guide]

    Automatic enrolment update

    There has been a lot of attention in the media on the increase in the minimum contributions rates under automatic enrolment from April 2019. That is beginning to address the issue of sufficiency of benefits for members. The Government has taken the opportunity afforded by this attention to reiterate its commitment to reduce the minimum age for qualification as an Eligible Jobholder from the current 22, to 18. However, the effective date of this change has not yet been set, with the Government choosing to wait until the effects of the recent contribution increase have worked through before taking a decision.

    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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