Pensions Bulletin 2022/02
Our viewpoint
20 January 2022
- DWP finalises its stronger nudge rules on seeking pension guidance
- Accessing pension savings – MPs have their say
- More pensions tax news from HMRC
- ‘Easy read’ guides to the new State Pension published
DWP finalises its stronger nudge rules on seeking pension guidance
The DWP has responded to its consultation on regulations that will require trustees of occupational pension schemes, in respect of flexible (ie typically DC) benefits, to ensure that individuals are referred to ‘appropriate pensions guidance’ (delivered by Pension Wise) and have either received or opted out of receiving it, where they are proposing to access or transfer their DC benefits.
A number of changes to these ‘stronger nudge’ regulations consulted on last July (see Pensions Bulletin 2021/29) have been made and are usefully tabulated in Chapter 7 of the response document. These changes don’t appear to alter any of the policy intent. The coming into force date is now 1 June 2022 – the same day as the FCA rules provide for in relation to contract-based schemes (see Pensions Bulletin 2021/51).
The Occupational and Personal Pension Schemes (Disclosure of Information) (Requirements to Refer Members to Guidance etc.) (Amendment) Regulations 2022, (SI 2022/30) made under the Financial Guidance and Claims Act 2018, which implement the stronger nudge for occupational pension schemes, were laid before Parliament on 17 January 2021.
In a separate blog, David Fairs, Executive Director of Regulatory Policy, Analysis and Advice at the Pensions Regulator, says that the Regulator is aiming to produce its own guidance on this new requirement ahead of when the new duties come into force.
Comment
Occupational pension schemes providing flexible benefits now need to urgently revisit their processes for when members request access to or ask to transfer such benefits in order to incorporate this ‘stronger nudge’. However, at least they now have until the end of May to make all the necessary changes rather than the beginning of April.
Accessing pension savings – MPs have their say
Parliament’s Work and Pensions Committee has published the results of its inquiry on access to pension savings which it launched last February (see Pensions Bulletin 2021/08). Introducing it, Stephen Timms MP warns that “nudging savers will not be enough” and pension savers need more support from Government and regulators to enable them to make better decisions when it comes to accessing their pension savings.
Amongst the recommendations are the following:
- A goal should be set of at least 60% of people to be using Pension Wise or receiving paid for advice when accessing their pension pots for the first time – currently only 14% of DC pension pots are accessed after the use of Pension Wise
- Two trials of automatic Pension Wise appointments should be initiated – the first at the age of 50, before an individual can access their pension savings, and the second when they access their pension for the first time
- The Pensions Advice Allowance, which allows £500 to be withdrawn from a pension up to three times in different tax years for advice, should be overhauled with the annual limit removed and MaPS and advisers encouraged to signpost its use
Other recommendations include: initial work on the possibility of ‘decoupling the 25% of a pension pot which is tax free from the rest of the pot’ because of concerns that poor choices are made in respect of the 75%; encouraging more people to choose a mixture of annuities, lump sums and drawdown; a call for the pensions dashboard programme to be ‘properly resourced to get implementation right and ensure there is up to date data for every pension scheme’; and for the Government to drop its proposals for a pension statement season ‘if the benefits cannot be demonstrated’.
Comment
It has taken a long time for the Government to deliver on the ‘stronger nudge’ policy (see article above). It seems likely that it will want to evaluate the success or otherwise of that before taking any further steps. However, the MPs have a point and it seems inevitable that the Government will come under pressure to do more to assist pension savers in making the right decisions when they come to access their savings.
More pensions tax news from HMRC
Seven separate topics make it into HMRC’s latest pension schemes newsletter. Arguably, the most important is guidance (labelled ‘provisional’) on some of the features of the increase to normal minimum pension age (NMPA) and the protections from this increase, both of which are currently being legislated for through the Finance Bill (see Pensions Bulletin 2021/47), which has now passed through Committee stage.
On these NMPA provisions there have been lots of calls for guidance on what is likely to be a complex area in practice, and the guidance covers points needed to implement the protections such as (to some extent), what counts as an ‘unqualified right’ (in scheme rules at the key date of 11 February 2021), what counts as a ‘substantive request to transfer’ for those marginal cases on the move at the key date of 4 November 2021, and some reminders of some of the other tricky points on individual versus block transfers.
There is mention of the actual transition across 6 April 2028 and the likely need for regulatory change to ensure that policy operates as intended – for example in relation to unprotected members. This is welcome acknowledgement and we hope it will be released well ahead of 2028, but no timeline is mentioned.
Amongst the other topics covered are the following:
- An ending on 31 March 2022 of all the remaining temporary changes to relief at source processes (brought in to help scheme administrators during the pandemic), other than those relating to obtaining ‘wet signatures’ which are extended to 31 March 2024
- Some more information on the launch of the Managing Pension Schemes service – with a number of features likely to be available from early April 2022, including the ability to migrate data from the Pension Schemes Online predecessor service. Schemes are encouraged to collate all necessary information (set out in an Appendix A) in preparation for the planned release of the scheme migration feature in early April 2022. The newsletter also confirms that, from mid-March 2022, Accounting for Tax returns for any quarter from 1 April 2020 will have to be submitted on the new service. This will, in particular, affect Q1 2022 returns which will need to be submitted by 15 May 2022
- An outline of the Finance Bill provision that extends the deadlines in relation to the annual allowance charge Scheme Pays facility for charges arising from retrospective changes of fact (see Pensions Bulletin 2021/47). Regulations to build on these provisions are expected to take effect on 6 April 2022 and a consultation on them is promised in early 2022
Comment
It is good to see some guidance on the NMPA provisions – and although provisional to the final Bill clauses, we note that the Bill has now passed through Committee stage. But no doubt more questions will come through, so we hope there will be even more guidance on common points.
There are several features to this protection that are different (and more complex) than earlier NMPA change protections. Although the change does not happen until 2028, the protection aspects (and identifying who is in frame and how) have immediate impact, particularly where members’ benefits move from one scheme to another.
On the Managing Pension Schemes service, with HMRC confirming that the Accounting for Tax return submission for the quarter ending 31 March 2022 can only be made via this new service, administrators should start to enrol as soon as possible and start collating the relevant information needed to migrate from Pension Schemes Online.
We understand HMRC is reaching out to those listed as Scheme Administrators for a pension scheme which has yet to enrol where an Accounting for Tax return has previously been submitted.
‘Easy read’ guides to the new State Pension published
The DWP has published three ‘easy read’ guides to the ‘new’ State Pension – ie the pension potentially available to those reaching State Pension Age since 6 April 2016. The first guide sets out what is the new State Pension and who can get it, the second looks at how to apply for the pension and the third sets out how the DWP pays the pension.
All three guides are presented as a series of pictures or graphics with no more than a short sentence to accompany each picture or graphic. They are indeed an easy read!
Comment
Given the very accessible nature of these documents, trustees and pension providers may wish to link to these guides in their member communications. Arguably, the guide on how to apply is the most useful as the State Pension does not start automatically on reaching State Pension Age – it needs to be claimed.