The clock is ticking

Alarm clockIt’s that time of year again: the weather is wintry, despite it being nearly Spring; the New Year TV dramas have finished with nothing to replace them; and we are into the final few days of implementing Pension Protection Fund (PPF) levy saving measures. Are you on track to meet the PPF’s deadlines?

Trustees that have the benefit of a contingent asset guarantee should check with their actuarial advisers whether the levy saving could generate £100,000 or more. If so, the trustees will need to obtain a guarantor strength report, which must be submitted in hard copy to the PPF by 5pm on 29 March 2018. The trustees must obtain this report before certifying or re-certifying a contingent asset guarantee. Don’t leave it too late. The report is a new document, which will require some thought. Some trustees may wish to obtain a guarantor strength report whether or not the amount of levy saving requires it. This is because it is likely to provide more certainty as to whether or not the PPF will accept a guarantee as a contingent asset.

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Holiday plans delayed! – but only for SAYE payment holidays…

Participants in Save as Your Earn (SAYE) schemes are currently able to take a “payment holiday” of up to six months. This helps participants keep their SAYE options by allowing them to take a break from making monthly payments, for example while they are on maternity leave.

In the Autumn Budget the government announced the payment holiday period would be extended from 6 months to 12 months. This was good news for SAYE participants but, as always, the devil was in the detail.

Would the extended payment holiday only be available to those on maternity and parental leave (as suggested in the Autumn Budget) or would all participants benefit? Would it apply to all options or only those granted after April 2018? And, of course, SAYE administrators would need time to update their systems once the details had been ironed out.

Yesterday, the government announced a delay in implementing the extended payment holiday, and it will now apply from 1 September 2018. This is good news as it gives time to work through the technical issues and for SAYE administrators to update their systems. The government also confirmed that the change will apply to all SAYE participants, whatever the reason for the payment holiday and whenever the SAYE option was granted.

While we may have to wait a little longer for it, this change definitely will be as good as a holiday!

U.S. Budget Act and Retirement Plans

When Congress passed and President Trump signed the Bipartisan Budget Act of 2018 earlier this month, the folks monitoring developments in Washington, D.C. knew, among other things, that it ended a very brief government shutdown, dramatically increased government spending, and raised the debt ceiling.  But few knew that the Budget Act will affect tax-qualified retirement plans.  It does.  Here is how.

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To infinity and beyond – anti-money laundering hits new heights

Buzz LightyearWhilst trustees of occupational pension plans are still grappling with the implications of the EU’s fourth money laundering directive, they will be horrified to hear that the fifth money laundering directive is already on its way! The fourth money laundering directive was implemented in the UK on 26 June last year and was the first one that has applied to occupational pension plans. Trustees (and many pension lawyers!) are still assessing the impact in terms of additional record keeping and whether or not to register on HMRC’s Trust Registration Service. In respect of the latter, certain types of investment structures, such as investments made through partnership arrangements, might have resulted in a tax liability rendering a pension plan a “taxable relevant trust”. This is against the backdrop of HMRC not expecting that any occupational pension plans would need to register on the Trust Registration Service.

The story does not end there, however.  The European Parliament was not satisfied that the fourth money laundering directive went far enough in terms of transparency of trust ownership. With the European Commission’s proposal to extend the fourth money laundering directive suggested in July 2016, the European Parliament took the opportunity to push for the same transparency for trusts as is currently in place in respect of corporate entities.

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“You gotta speed it up, and then you gotta slow it down…”

Two Glasses of Bucks Fizz

And, if you are a trustee or a pensions professional, you definitely have to play around before making your mind up whether a pensions transfer can go ahead.

Transfer legislation is changing from 6 April 2018 as highlighted in the three points below, and there are also further changes on the horizon.

1. Bulk transfers of formerly contracted-out rights

This is a hangover from the abolition of contracting out. After a fair amount of pressure from the pensions industry, the DWP intends to bring into force regulations that will allow, without member consent, bulk transfers of benefits that include contracted-out rights to schemes that have never been contracted-out. Safeguards will be put in place, which will broadly require the contracted-out element of the benefits to be provided on the same basis in the new scheme as they were in the old scheme. The regulations should assist those employers wishing to implement a bulk transfer of benefits to a newly established scheme. The DWP consultation closed on 17 January 2018 and we are currently awaiting the response to that consultation.

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But sir, my dog ate the scheme accounts!

Naughty dog

Four trustees of an occupational defined benefit pension scheme have been fined £500 each by the Pensions Regulator (TPR) for their failure to obtain audited scheme accounts on time without reasonable excuse.

This is the first fine of this type, and follows TPR’s announcement in 2017 that it was going to be “clearer, quicker and tougher” in exercising its regulatory powers.

Legislation requires trustees to obtain audited accounts within 7 months after each scheme year end. In this case, the trustees had failed to obtain audited scheme accounts on time for two consecutive scheme years ending 5 April 2015 and 5 April 2016. Continue Reading

What does US tax reform mean for non-US institutional investors – and UK pension funds in particular?

Colleagues have previously blogged about US tax reform and the impact on US retirement plan provisions. We highlight in this blog the key takeaway points from the US tax reform that will impact upon non-US institutional investors.  In particular, it is worth noting that pension funds investing through partnership structures and/or real estate may be affected by the new tax provisions.  Significant consequences of the US tax reform include:

  • Corporate rate reductions will, in conjunction with limitations on the deductibility of interest expense, cost recovery and international changes, impact the values of US corporations generally.
  • Rate reductions will impact the level of taxation of those non-US institutional investors that realize US trade or business income (commonly referred to as “effectively connected income” or “ECI”) or gains from disposition of certain interests in US real estate.
  • Tax law changes will impact the tax treatment and valuation of investment asset classes such as corporate equities and investments in real estate and private equity.
  • The tax treatment of private investment funds and their managers will also be impacted with potential collateral effects on non-US institutional investors.  Seeking to resolve a decade old controversy over the taxation of carried interests granted to fund managers, the legislation imposes a three-year holding period requirement for partnership interests held by fund managers in order for the gains to be treated as long-term capital gains that are taxable at preferential rates.  Non-US institutional investors may wish to be alert to possible proposals from fund managers to address this change.
  • Many non-US institutional investors currently use intermediary entities as investment vehicles, including US corporations that serve to “block” the ultimate non-US investor from US income tax payment and return filing obligations.  To promote tax efficiency, these US blockers have frequently been capitalized with a combination of debt and equity.  These arrangements may need to be revisited, both prospectively and retrospectively.

These impacts are only illustrative.  Others will no doubt emerge in connection with specific investments and investment structures and will be identified as the new legislation is analysed in more depth, as implementation issues arise, and as administrative interpretations are issued.  If you would like to discuss the potential impact of the US tax reforms for your business or pension plan please do get in touch with me, Lindsay M Fainé ( or my UK colleague, Timothy Jarvis (

Why might you need to know the birthdays of your pension plan actuary and investment manager?

Money Laundering Wheel

…… The answer is not so you don’t forget to send them a card!

If you don’t know, please read on.

We recently issued a communication in relation to the new anti-money laundering requirements affecting pension plan trustees, along with an earlier blog, which set out the steps that trustees should be taking in order to be compliant. One of those steps is to identify the “beneficial owners” of the pension plan.

“Beneficial owner” is widely defined in the money laundering regulations and captures some unlikely candidates. Whilst, as would be anticipated, the definition captures employers, trustees and plan beneficiaries, it also captures any other individual who could exercise “control” over the pension plan. For example, “control” would include a power (whether exercisable alone or jointly) to apply trust property, appoint trustees or add beneficiaries, amend a pension plan or consent to or veto any plan amendment.

The definition casts the net widely. It is going to capture the trustee directors of a corporate trustee, but it could also capture other professionals involved with the running of a pension plan. The definition might capture pension plan actuaries (for example, if their input is required before a pension plan amendment could be validly made). The definition might also capture an investment manager to whom discretionary powers have been delegated, as being someone who has the power to apply trust property. These examples are not exhaustive. Continue Reading

Watch out Rumpelstiltskin…

You never know who is listening!

Back in April last year we told the tale of the “granny turned wolf” as the Pensions Regulator (TPR) began to bare its teeth and prosecute those who had failed to comply with notices issued under s72 Pensions Act 2004 requiring information/documentation to be provided to it to assist in the exercise of its regulatory functions. In this blog we examine the disclosure of restricted information under s82 of the Pensions Act 2004 and the implications for anyone in receipt of a Warning Notice from TPR.

In the fairy tale, when Rumpelstiltskin revealed his name he thought no-one was listening but in fact the Queen’s messenger was close by. When contents of Warning Notices issued in respect of British Home Stores (BHS) were revealed, the media were on hand, ready to spin strands of straw into pure gold.

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U.S. Supreme Court grants writ of certiorari on Railroad Retirement Tax Act issue


The U.S. Supreme Court is poised to resolve a split between the Seventh and Eighth Circuits related to a federal program that is a well-kept secret. Nothing as intriguing as Russian spies or hacked emails… but, I think, interesting nonetheless.

Of course, you have heard about the Social Security system. And you probably know that U.S. employers pay and withhold taxes under the Federal Insurance Contributions Act (FICA) to fund Social Security and Medicare benefits for retired workers in the U.S. But what you may not know, however, is that around the same time that the Social Security system was being put in place, the federal government established a separate program to shore up railroad companies’ pension obligations.

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