That Was The Year That Was
23rd December, 2014
When trying to prepare a sports review of the last 12 months, it soon became obvious that it had been a bit of a dull year, even with a World Cup on (it just wasn’t the same without the vuvuzelas). So, how better to spice things up a bit, than to also include some pensions highlights from the year? It was Harold Wilson who said that a week is a long time in politics, but those in the know will tell you that an hour can be a long time in pensions – but perhaps not using the same reasoning as Mr Wilson – and especially on a Monday morning.
The sporting year began with Australia’s cricketers defeating England at Sydney Cricket Ground, and completing a predictable Ashes 5-0 whitewash.
In the pensions world, the Pensions Regulator (TPR) re-drafts its Code of Practice 3: Funding Defined Benefits as part of its consultation on the funding of occupational pension schemes.
The legal definition of “money purchase” benefits is amended.
Seattle Seahawks win the Super Bowl (I told you it was a dull year).
The European Commission publishes IORP II, expected to come into force on 31 December 2016.
Two European Court rulings raise the possibility of pension schemes reclaiming VAT on investment management costs.
TPR makes encouraging noises about record-keeping, but notes that there is still room for improvement.
Ireland wins rugby’s Six Nations Championship.
A quiet month in pensions, except for the Chancellor announcing “the most fundamental reform to the way people access their pensions in almost a century”, with Government plans to:
- allow DC members access to their whole fund from April 2015, putting an end to compulsory annuitisation;
- ban transfers from Public Sector schemes to DC schemes (and considering the same for private schemes);
- introduce as an interim measure improved limits on drawdown and trivial commutation;
- increase the minimum retirement age so that it is no more than 10 years below SPA by 2028.
Same-sex marriages in England & Wales are legal from 13 March 2014.
A French horse, Pineau de Re, wins the Grand National.
Reductions in annual and lifetime allowances come into force on 6 April.
The delayed new Disclosure regulations came into force.
The Pensions Bill going through Parliament contains legislation to introduce a single-tier state pension from 2016.
The High Court decides on the IBM UK “Project Waltz” case, concerning the breaching of the company’s duty of good faith to its scheme members .
Manchester City win the Premier League; Celtic win the Scottish league, and Cliftonville are champions in Northern Ireland. England’s footballers begin preparations to bring back the World Cup from Brazil.
The ninth edition of the Purple Book is published, and reports a stabilisation in DB closures to new members, and an improvement in scheme funding.
The PPF publishes its consultation for the next three levy years.
England doesn’t quite win the World Cup, but does amass more points than three other countries: Cameroon, Australia, and Honduras, and the same number of points as Japan, South Korea, Ghana, and Iran.
TPR publishes its Code of Practice No. 3 on funding DB schemes. Trustees are required to take a balanced view with regards funding, covenant and investment strategy.
Rory McIlroy wins the Open Championship at Royal Liverpool. Normal tennis service is resumed with no Britons winning at Wimbledon.
The Treasury issues its response to Freedom and Choice in pensions, announced in the Budget:
- transfers from private DB to DC still allowed;
- “free” guidance to be provided for members retiring from DC schemes, from independent organisations;
- minimum pension age to rise to 57 in 2028, and then be 10 years below SPA;
- DC schemes can use new flexibilities without amending their documentation, by using the permissive statutory override.
New definition of “money purchase” comes into force on 24 July.
The Government signals its intention to enable the establishment of collective DC plans. In the process Steve Webb clearly indicates his intention to push through all of what he has worked for in pensions in the last decade within the 10 months before the April 2015 election. Its going to get busy…..
Glasgow hosts the Commonwealth Games.
TPR publishes consultation on “employer override” power relating to abolition of contracting-out for DB schemes in April 2016.
The RPI/CPI discussion is re-opened after a judgement in the Arcadia case.
Pension fund accountants welcome proposed SORP changes for pension fund accounting.
Europe win the Ryder Cup at Gleneagles.
Scotland narrowly votes not to vote for “independence”, and so all of the potential pensions problems that would have arisen are put to one side; for now. However there is a promise for increased fiscal autonomy which will have an impact in a number of areas.
DWP announces that NEST restrictions are to be scrapped.
Russia’s Ainur Shaibakov wins the International Draughts World Championship (I know, it was another quiet month).
The PPF confirms changes to its levy calculations, following its earlier consultation, and using a new insolvency risk model, developed by Experian (and replacing Dun & Bradstreet).
Taxation of Pensions Bill presented to Parliament on 14 October, to accommodate the new flexible DC arrangements being introduced in April 2015.
Pension Schemes Bill 2014 to 2015 is debated in Parliament.
The world’s oldest international football match – between Scotland and England – is played in Glasgow and, as viewed through my tartan-tinted spectacles, after some dubious decisions by the referee, England narrowly win 3-1 after scoring three breakaway goals, all of which look suspiciously offside.
Short service refunds from DC schemes to end in October 2015.
The Treasury proposes a DC charges cap, and detailed new governance standards for workplace money purchase schemes.
Lewis Hamilton wins Sports “Personality (!!)” of the Year. Evidence of the lack of interesting sport in the year. Glasgow’s 2014 Santa Dash took place on Sunday 7 December, with lots of money raised for worthy causes.
The Chancellor’s Autumn Statement confirms:
- DB to DC pension transfers will still be permitted;
- From April 2015, reduction in tax paid on inherited pensions (if under 75, and DC funds have not been drawn, future payments are tax-free;
- If over 75, payments charged at beneficiary’s marginal tax rate, or 45% if lump sum (although this too will be marginal rate from April 2016);
- Small pot withdrawal rules to be available from age 55 from April 2015;
- No change to age limit, 75, at which tax relief can be sought on contributions;
- £10,000 Annual Allowance will apply to contributions to a money purchase plan for individuals who have flexibly accessed a pension.
2015 promises to be an interesting year, particularly when the new flexibility is introduced in April. Whether or not our streets will be filled with newly-acquired expensive sports cars remains to be seen, although I tend to think that our prospective pensioners are a bit more shrewd and prudent than some give them credit for.
On that positive note, we wish you all a Happy Christmas.
THIS ARTICLE WAS WRITTEN BY A FORMER MEMBER OF OUR TEAM