After a busy 2016 in the pensions world it looks likely that 2017 will be just as eventful. The UK government will be following up on various consultations and finalising numerous pieces of legislation that are currently in draft.
The planned green paper on DB pension reform should also make for some interesting reading, especially if the government takes up any of the recommendations made by the Work and Pensions Committee on 20 December 2016 following its consideration of the BHS pension plan and interviews with (amongst others) Sir Philip Green, Chief Executive of the Pensions Regulator (Lesley Titcomb), Chief Executive of the Pension Protection Fund (Alan Rubenstein), former Pensions Ministers Steve Webb and Baroness Altmann CBE and Chief Executive of the Pension and Lifetime Savings Association (Joanne Segars). See our recent blog on this.
Pensions legislation expected to come into force during 2017 includes:
- The implementation of an increase in PPF compensation for long service pension plan members.
- The introduction of a new income tax exemption and NICs disregard to cover the first £500 worth of pensions advice provided to an employee in a tax year.
- An increase in insurance premium tax to 12% from 1 June 2017, potentially prompting some employers to review their employee benefit programmes.
- Rules around the authorisation and administration of master trusts.
What else could there be that will impact on the sponsoring employers and trustees of pension plans in 2017?
Trustees, as usual, will have a bit of a minefield to negotiate:
- They will need to comply with the Insurance Act 2015 when renewing or taking out insurance – in particular, trustees will need to be familiar with the new duty of ‘fair presentation’ and make sure that they supply all relevant data to the insurer.
- For those trustees who operate a formerly contracted-out salary-related pension plan and who wish to take advantage of the trustee modification power to change the date from which fixed rate revaluation is used in respect of GMPs, will need to pass an appropriate resolution before 6 April 2017.
- Trustees will also need to take action during 2017 to ensure trustees are compliant with the new General Data Protection Regulation by 25 May 2018.
Employers will remain occupied by the usual funding issues for occupational pension plans and more widely by automatic enrolment:
- Uncertainty in the global economy is likely to impact on inflation and interest rates. If we assume that recent interest rate rises by the US Federal Reserve are followed by a similar rise in the Bank of England base rate, that will have an effect on pension plans. The precise impact depends on where the plan is in its investment cycle but for those who are not already liability matched it is likely that liabilities will be reduced and pressure on corporate sponsors eased.
- Whilst the largest employers continue to implement three yearly re-enrolment, the smallest employers are reaching their first staging date.
- Employers bringing in new recruits in reaction to the Apprenticeship Levy (from April 2017) will also need to consider their pension entitlements. See our recent blog on this subject.
Finally, the Courts will also be busy during 2017 with various questions of pensions law. IBM (employer’s duty to act in good faith towards pension plan members), British Airways (trustees’ power to amend a plan to grant discretionary pension increases), Bradbury v BBC (capping pensionable salaries), Hampshire v PPF (level of cap on PPF compensation), Safeway v Newton (equalisation), Steria (requirement for actuarial certificates) and United Biscuits (reclaiming VAT on pension fund management services) are all set to make pensions headlines this year.
Watch this space!