This year has been a busy one for pensions and 2015 looks to be very much the same. Squire Patton Boggs has highlighted 12 key areas for trustees to focus on in 2015.Here's the final four things for your 2015 to-do list.
9. Same Sex Marriages - Will the Government Say "I do" to Pensions Equality?
The Marriage (Same Sex Couples) Act 2013 came into force on 13 March 2014, allowing same sex couples to marry. Under the new legislation occupational pension plans must provide, as a minimum, the same survivors' benefits to same sex spouses as to civil partners.
This means that the period of a member's service on which a same sex surviving spouse's benefit is based can be restricted to service accrued from 5 December 2005 (other than for contracted-out benefits).
Some pension plans provide this minimum level of benefit, while others have chosen to provide equal benefits for same sex spouses, opposite sex spouses and civil partners.
The Government undertook to publish a review into the differences in survivor benefits in occupational pension plans for opposite and same sex spouses, civil partners, widows and widowers by 1 July 2014.
In this review, the Government concluded that it would need to think "very carefully" about whether the law should be changed to require equal benefits to be provided to same sex and opposite sex spouses, or whether the difference in treatment can continue.
Hopefully, we will get some definitive answers in 2015. Separately, differences in survivors' benefits from pension plans for same sex couples could be subject to legal challenge. We await a judgment from the Court of Appeal on this issue in 2015.
Trustees should ensure that the pension plan rules reflect the intended level of benefits to be provided to same sex spouses. Where a pension plan provides the statutory minimum level of benefits for same sex spouses and civil partners, trustees should continue to monitor developments.
10. Shared Parental Leave - More Complicated than Child's Play
A new form of family leave known as ‘Shared Parental Leave' will be available for parents whose child is due to be born or is adopted on or after 5 April 2015. This new form of leave is intended to offer parents greater flexibility in sharing childcare responsibilities for children under one, or in the year following adoption, and parents will be able to take up to 52 weeks of leave between them. Many pension plan rules will not accommodate the intended level of benefits for members on Shared Parental Leave and may need updating.
Trustees should review pension plan rules and employer family leave policies to ensure that the correct level of pension benefits is provided for members on Shared Parental Leave.
11. Commutation - All Change!
From April 2015, the age at which a member can convert his pension benefits into a lump sum under the trivial commutation rules and ‘small pot' commutation rules will decrease to normal minimum pension age (usually age 55), or earlier if the member satisfies HMRC's ‘ill-health condition'. It is proposed that only DB schemes will be able to pay trivial commutation lump sums. In the meantime, trustees who wish to allow members to take advantage of the new higher limits for commuting pensions into lump sums, which have been available since March 2014, should ensure that their pension plan rules allow this.
Trustees should review pension plan rules on trivial commutation and the commutation of small pots to ensure that these reflect the practice that they wish to operate.
12. HMRC Guidance - VAT's All Folks!
HMRC has issued further guidance on the VAT treatment of costs incurred by pension funds following two decisions of the Court of Justice of the European Union. In summary, DC pension plans will benefit from VAT exempt administration and fund management fees but in some cases service providers may trigger price adjustment clauses in contracts to allow for irrecoverable input tax and/or seek pricing adjustments.
DC pension plan trustees can ask service providers to refund VAT previously charged on fees but can only look back four years in doing so. If the employer has previously recovered the VAT as input tax this would need to be unravelled. HMRC is also changing its policy on the recovery of VAT input tax for fees incurred in the management of DB pension plans.
In order for employers to benefit, HMRC considers that employers will need to be party to the pension plan management contracts. Contracts may need to be restructured to secure the higher VAT recovery, so trustees and service providers may be involved in discussions to facilitate this during 2015 .
In the meantime, sponsoring employers of DB pension plans can continue with their current practice of VAT recovery under transitional arrangements until 31 December 2015.
The sponsoring employers of the UK’s largest pension schemes may have to put an additional £40-£45bn into their schemes over the next decade, Lane Clark & Peacock (LCP) warns.
Caroline Kurup explores the latest TPR guidance on superfund transfers and what scheme trustees should be considering
Pension scheme trustees and sponsors should only seek to transfer members’ benefits to a defined benefit (DB) consolidator if there is no “realistic prospect of buyout in the foreseeable future”, The Pensions Regulator (TPR) says.
Guy Opperman says two page, simpler statements as well as an annual ‘season’ in which to issue them could be transformative steps for the UK pensions industry
A second pensions bill is likely during the “life of this parliament”, according to pensions and financial inclusion minister Guy Opperman.