Pensions: What's new this week 27 July 2020
Headlines in this article
Related news and insights
Publications: 27 November 2023
Publications: 27 November 2023
Publications: 27 November 2023
Publications: 20 November 2023
Each week the Allen & Overy Pensions team, rounds up the latest legal and regulatory developments in the world of occupational pensions. Contact us if you would like to receive our podcast summary, or our full briefing by email, at the start of each week. Read the latest edition of 'What's new this week' below to find out more information on the stories that matter to you.
Call for evidence: pensions tax relief administration
The government has published a call for evidence on pensions tax relief administration, as announced in the Budget in March. For some time, attention has been focused on how low earners may be affected by whether a scheme operates net pay or relief at source (RAS), and the government recognises that the two methods provide different results for people who do not pay income tax (the call for evidence contains some examples).
The government is seeking views on changes that can be made to the existing administrative processes to improve outcomes – it is not proposing to introduce an entirely new method of administering pensions tax relief. It also considers and asks for feedback on four suggested approaches, including for employers to offer both a net pay scheme and a RAS scheme for employees, or for RAS to be mandated for DC schemes. It has also asked for any evidence on whether RAS creates significant additional burdens compared to net pay (and how these might be eased).
The call for evidence is focused on pensions tax relief administration only – it does not cover wider issues around pensions tax relief. The call for evidence closes on 13 October 2020.
TPR: report on Bernard Matthews scheme
The Pensions Regulator (TPR) has published a regulatory intervention report in relation to the Bernard Matthews Ltd Pension Scheme. The business and assets of the sponsoring employer, BML, were sold in a ‘pre-pack’ deal after it went into administration in 2016. TPR examined the events leading up to BML’s insolvency and the pre-pack (including events before and after a private equity investment in 2013, which included the private equity fund being granted a charge that ranked ahead,of the pension scheme, and a controlling stake in the parent company).
As part of the investigation, TPR issued several statutory notices for information and reviewed thousands of documents – you can read more about information-gathering by TPR in our briefing What to do if… the Pensions Regulator asks for information.
TPR concluded that there were no reasonable grounds for a Contribution Notice – the private equity fund’s profit was a legitimate consequence of the terms of its high-risk investment in BML, which had been negotiated and agreed on an arm’s length commercial basis with the BML board and the trustees. The agreed return was high compared to conventional bank lending (had that been available), but was in line with what was on offer in the private equity market at the time. TPR found no evidence of unreasonable conduct on the fund’s part during its association with BML and the scheme, or in respect of the sales and insolvency processes. However, TPR noted that:
We will thoroughly investigate pre-pack insolvencies to establish whether the use of our powers can and should be used. Our investigation will consider all relevant factors, which includes looking at the likelihood of a business’ survival and what the alternative scenarios might look like, as well as the conduct of all those involved and any related transactions.
Finance Act 2020
The Finance Bill has been passed by Parliament and received Royal Assent.
The Act makes changes to the tapered Annual Allowance, which applies to high earners. The Act increases the threshold income to GBP200,000, and the adjusted income threshold to GBP240,000 – HMRC has now updated the relevant section of the Pensions Tax Manual to reflect this.
Administrators and employers will have been aware of this change for some time, but should check that any agreed changes to systems and communications have been actioned.
The Act also includes a temporary easement to the tax rules on protected pension ages to prevent individuals re-employed as a result of coronavirus from losing a protected pension age. HMRC has updated the relevant section of the Pensions Tax Manual page; contrary to the initial announcement, the guidance notes that the easement may extend beyond public sector workers. Depending on the facts and circumstances of each case, a member may benefit from the easement so long as the only or main reason that the member was re-employed was to help their employer respond to the public health, social, economic or other effects of coronavirus.
CDC schemes: draft tax changes, policy paper
The Pension Schemes Bill (currently before Parliament) contains the legal framework for collective defined contribution (CDC) schemes.
HMRC has now published a policy paper, and draft legislation, on updating the existing tax framework to reflect the introduction of CDC schemes. The amending legislation (to be contained in the next Finance Bill) is intended to be effective from 6 April 2021. Comments can be submitted on the draft legislation until 15 September.
Latest HMRC newsletter
HMRC’s latest Managing pension schemes service newsletter contains information on new features on accounting for tax, and an update on the delivery timeline for the service (including registration and reporting, and the inclusion of financial information). HMRC is still reviewing how and when it will migrate scheme details to the service, and will provide further information in due course.
Changes to moratoriums, restructuring plans
The Corporate Insolvency and Governance Act contains new measures for struggling businesses including moratorium and restructuring plan options – you can read more about key implications of the Act here and here. Recently the government made regulations to enable the Pension Protection Fund (PPF) to exercise voting and other rights that would otherwise be exercisable by scheme trustees where there is a moratorium, or a restructuring plan is proposed (WNTW, 13 July 2020).
The government has now expanded the scope of moratoriums and restructuring plans in respect of relevant co-operative and community benefit societies (and some other entities), and made related changes to the PPF’s powers.
Calculating pension loss
A new edition of the Ogden tables (setting out guidance for calculating lump sum compensation in personal injury and fatal accident cases) has been published. The explanatory notes have been expanded to include a new section on quantification of pension loss claims, amongst other changes.