Atkin trustees, actuaries, consultants & administrators

Current Issues - January 2018

Corporate news: There are a number of high-profile pension stories have highlighted the power of TPR and the PPF. With the Prime Minister also promising tougher sanctions against “executives who try to line their own pockets” at the expense of UK company pension schemes we can expect that funding of the pension schemes to continue to be in the news over the next couple of months. The Prime Minister has already promised a white paper, which is expected to be published in March, would set out “tough new rules” for company directors who put their workers’ pensions at risk.

These cases have highlighted the importance of;

• having a thorough understanding of the company covenant and monitoring its strength between triennial valuations;

• ensuring that the payments from the Sponsoring Employer (either as dividend payments to shareholders or payments made to other companies in the group) are fair and reasonable given the funding position of the Scheme and the level of the funding deficit.

This is likely to mean an increasing burden falling onto the TPR who will be under increased pressure to make sure that they are effectively monitoring these potentially big headline grabbing cases. Overall, and with everything else going on, it is set to be an interesting year.

Company pension accounting: The International Accounting Standards Board is concerned that companies may amend their scheme rules in order to recognize a DB surplus in the company accounts. Arguably, the simplest approach might be to make it easier for employers to recognise a surplus and therefore, perhaps, encourage them to allow surpluses to build up in their pension schemes.

Insured schemes – VAT exemption to cease: HMRC are intending to remove the VAT exemption for services provided by the insurer. This is particularly relevant for schemes that receive full services from insurance companies. Trustees and sponsors will therefore, see an increase in the level of their fees and may, therefore, want to consider whether a benchmarking exercise might be appropriate.

Scottish income tax: The Scottish Government intends to change the bands and rates of income tax of their taxpayers from the 2018/19 tax year. Schemes will need to makes sure that they are ready for the change.

DWP plans to ease transfers of contracted-out rights: DWP has put forward draft legislation to allow bulk transfers of contracted-out salary-related rights to schemes that have never been contracted-out removing one of the impediments that was preventing some corporate sponsors from merging their schemes.

State pension funding will be depleted by 2035 unless NI Contributions are increased: The Government Actuarial Department believes that NI contributions need to increase by 5% to cover the expected shortfall.

 

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Thank you. Excellent communication, a rarity in this world of quick communication.

Member, MESL Pension Scheme