EMI options – the wait is over!

Alarm clockSince 6 April 2018 companies have been unable to grant new EMI options, because the existing EU state aid approval expired without fresh approval having been received.

So there has been much excitement today at the news that the EU Commission has now given state aid approval, and companies can now grant new EMI options. For companies that granted EMI options since 6 April (e.g. as part of a commercial transaction which could not be delayed) the wait continues as the EU Commission’s press release does not state the date from which their approval applies. We expect this will be indicated in the EU Commission’s formal decision, which has not yet been published. For the majority though, it’s good news and a welcome return to “business as usual”.

The state aid approval will apply as long as the UK is an EU member state, and the EU Commission has indicated that long-term approval of the EMI scheme will need to be dealt with in the EU withdrawal agreement.

An English pensioner, a French pensioner and a Canadian pensioner walked into a bar…

Three men in a pub

…none of them were hurt, but a bump on the head made them even more confused about their pension rights.

My colleagues in the Squire Patton Boggs immigration team are being asked by concerned employees: “What will happen to my pension after Brexit?” The answer is likely to depend, for private pension, on what your arrangement currently allows and, for the UK State Pension, where you reside (whether you live in England (i.e. the UK), France (i.e. the EU) or Canada (i.e. elsewhere in the world)).

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Does “cybersecurity” leave you cold?

Stealing personal data through a laptop concept

If I ever claimed to be an expert on IT systems and processes, those who work in our firm’s IT department would struggle to contain their amusement.

Along with many other forty-somethings, I am a proficient user of IT at work and at home – until something goes wrong. Then I find it frustrating because I realise that I am pretty clueless about how everything really works; in fact, I need an expert to put it right so that I can go back to pressing buttons and swiping screens to my heart’s content. I suspect that many pension plan trustees are in a similar place.

The Pensions Regulator’s recent guidance on cybersecurity leaves me feeling cold because it confirms the stark reality that one weak link in any chain may spell reputational or financial disaster for a pension plan. It seems like a very difficult thing to protect against.

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Happy New Tax Year!

New Year 2018 with TaxTo celebrate the new tax year, we provide a round-up of some of the pensions measures that come into force on 6 April 2018.

Bulk transfer without consent of DC benefits

At last, trustees and employers can close an occupational money purchase (DC) plan without the pension plan actuary having to decide how the certification requirement under the preservation regulations operates in the context of a DC bulk transfer. By way of a reminder, before 6 April 2018, an actuary had to certify that “the transfer credits to be acquired for each member under the receiving scheme in the categories of member covered by this certificate are, broadly, no less favourable than the rights to be transferred.” Did this mean, for example, that the actuary was expected to consider the charging structure in the receiving plan? Instead, trustees can reach their own assessment as to the suitability of the receiving plan. If the receiving plan is not an authorised master trust then the trustees must take investment advice from an adviser who is independent of the receiving plan. Broadly speaking, an adviser will be “independent” if he has not provided advisory, administration or investment services to the receiving plan, service provider or sponsoring employer or a connected firm in the preceding year before the transfer takes place.

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EMI option hiccup

The vagaries of EU State Aid approvals probably pass most of us by.  However, they have come centre stage for many SMEs with HMRC’s announcement that it is not expected that an extension to the UK’s existing State Aid approval for EMI options will be granted before 6th April, when the current approval expires.

HMRC has warned that options granted after that date but before any new approval is given may not qualify for the considerable tax advantages associated with EMI options (and so may instead be treated as non-tax advantaged employment-related securities options).

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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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