Benchmark for statutory increases in 2021 is 0.5%

The Office for National Statistics (ONS) has announced the inflation figure that will form the basis for many of next year’s statutory increases. The official annual rate of inflation for September 2020, using the Consumer Prices Index (CPI) measure, is 0.5 per cent.

Trustees to ‘nudge’ members toward Pension Wise

A statement of policy intent from the Department for Work and Pensions (DWP) confirms that trustees and managers of occupational pension schemes will be required to refer members to Pension Wise guidance when they seek to exercise their 'Freedom and Choice' options (whether by transferring or taking benefits directly from the scheme), and to facilitate guidance appointments. Before acting on the member's instructions the trustees will need to confirm that the member has either received guidance or has opted out. One of the DWP’s goals is to normalize the taking of guidance.

DC annual benefit statements reform to go ahead

The Department for Work and Pensions (DWP) has published its conclusions about last year's consultation exercise on simpler annual benefit statements for workplace pensions. It is planning another consultation exercise later this year on a mandatory approach to simpler statements for defined contribution (DC) schemes used to automatic enrolment. As a starting point, it will use the two-page template published on the Pension and Lifetime Savings Association (PLSA) website.

Viral news – October 2020

Regulator DC guidance on gated funds updated

The Pensions Regulator has (without publicising it) updated its guidance on ‘gated’ (temporarily closed) funds. It adds to the situations in which the re-direction of the member’s contributions back to the original fund (the one that was gated), when it re-opens, will not establish a default arrangement. It now also refers to both future contributions and assets accumulated in the alternative fund while the original fund was gated.

Job Support / Retention Schemes

[We were set to include a summary of the new Job Support Scheme that was to have replaced the Coronavirus Job Retention Scheme (CJRS) from 1 November 2020; but events overtook us and we have removed it.] Coinciding with the announcement of new restrictions in England effective from 5 November 2020, the Government has extended the CJRS - also known as the furlough scheme - until December 2020. It has also enhanced the terms of the support on offer, so that for the hours not worked by an eligible employee the Government will pay eighty per cent of wages, up to a cap of £2,500, and the employer will only need to cover the National Insurance and pensions contributions due. They will also be responsible, in the normal way, for paying the employee for any hours worked. More guidance is expected in due course.

Government rejects need for evaluation of pensions tax reliefs

The Government has rejected the Public Accounts Committee's suggestion that it should conduct a formal evaluation of the impact of pension tax reliefs. It has accepted most of the Public Accounts Committee's other recommendations for work on tax reliefs.

Court judgments

Transfers of personal data to the USA

In July the European Court of Justice (ECJ) invalidated the ‘EU – US Privacy Shield’ arrangement as a basis upon which personal data can be lawfully transferred from within the EU to ‘third countries’, outside of the EU. Data transfers based on standard contractual clauses are still possible, but data controllers and processors need to critically assess the level of protection that they will provide, in the context of the third country’s legal system.

Discrimination against male survivors of female scheme members

In a judgment published online in August 2020, an Employment Tribunal judge says that the Teachers' Pension Regulations 2010 discriminate unlawfully against the widowers and surviving male civil partners of female scheme members, because their pensions are calculated less favourably. The judgment is very brief, presumably because it was made 'by consent'. Her Majesty’s Treasury announced in a Written Ministerial Statement on 20 July 2020 that it had accepted that the difference in treatment (whereby male survivors of female scheme members receive lower pensions than comparable female survivors of male scheme members and survivors of same-sex relationships, when the members have pre-6 April 1988 service) would need to be addressed across the public sector.

Pensions VAT

In October 2020 the ECJ ruled that 'investment fund management services supplied for an occupational pension scheme, which do not provide any indemnity from risk, cannot be classified as "insurance transactions" ... and thus do not fall within the value added tax (VAT) exemption ... in favour of such transactions.' The trustees of a company's pension scheme argued that they were owed a VAT refund on fund management fees because Her Majesty’s Revenue and Customs (HMRC) had in the past extended the VAT exemption applicable to 'insurance transactions' to the fund-management activities of insurers. Notably, the trustees argued that the VAT should be refunded even if the management activities were carried out by non-insurers: this aspect of their case was based on the principle of ‘fiscal neutrality’, which says that the VAT system should not distort competition between different sorts of suppliers.

HMRC newsletters — October 2020

HMRC Pension Schemes Newsletter 125 covers:

• confirmation that the protected pension age easement, introduced to facilitate re-employment of key workers during the coronavirus pandemic, will expire on 1 November 2020;
• some new features of the Accounting for Tax facility within the online Managing Pension Schemes service;
• a reminder to administrators operating ‘relief at source’ on member contributions to submit the declarations due as part of the annual return of information;
• updated pension flexibility statistics;
• information about HMRC’s ongoing programme of removal of dormant log-in credentials for its online services; and
• the latest scheme registration statistics.