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Pensions Insights July 2022

27 July 2022

In our monthly update, Pensions Insights, we give you our take on the latest highlights in the world of pensions law and policy.

Case Law

Order for Debtor to draw personal pensions granted - Lindsay v O'Loughnane [2022] EWHC 1829 (QB)

By way of background to this case, Mr O’Loughnane had been found liable for a substantial sum of money resulting in a judgment which the claimant had only been able to enforce to a partial extent (with a substantial judgment debt outstanding).

The claimant in this case sought enforcement of the judgment against three pension arrangements of Mr O’Loughnane requesting (amongst other things) an order to require Mr O’Loughnane to give written notice to each of the three pension providers requesting they continue to hold his pension, requesting draw down on the date specified as his normal retirement date (or age 55, if later), and directing payment to the claimant.

The High Court was happy to, in principle, make that order, but noted that the draft order submitted by the claimant was not clear as regards payment of tax on the funds to be drawn from the pension schemes. In respect of this revision of the drafting and agreement of the parties in light of the judgment was requested failing which the Court would rule on the final wording.

New Law 

Draft legislation published for Finance Bill 2022-23

The UK Government has published the draft Finance Bill 2022-23 together with consultations on draft legislation including in relation to:

  • Low earners anomaly: pensions relief relating to net pay arrangements which will place a duty on HMRC to make top-up payments to individuals who save into an occupational pension under net pay arrangements, if their total taxable income is below the personal allowance;
  • Amendment to taxation of collective money purchase schemes to ensure that for members of a collective money purchase scheme that is winding up they can continue to be paid authorised pension payments and transfer to another pension scheme and receive drawdown pension; and
  • Pension Assets - Further tax provisions for Income Tax and Inheritance Tax in connection with the Dormant Assets Scheme (which introduces changes to Income Tax and Inheritance Tax legislation to make sure assets transferred to the reclaim fund which are subsequently returned, receive the correct tax treatment).

Consultation on draft legislation closes on 14 September 2022.

Regulations implementing CMA Order in force 1 October 2022

As mentioned in our last Insights the Occupational Pension Schemes (Governance and Registration) (Amendment) Regulations 2019 amend current legislation to integrate the CMA Order into pensions law.

The final form regulations have now been published and will come into force on 1 October 2022.


Recommendations to consolidate small DC pension pots published

The small pots group has published its Spring 2022 report which includes 3 recommendations in relation to consolidation of small DC pension pots.

The report highlights that Automatic Enrolment (AE) has been hugely successful in bringing millions more people into pensions saving, including those on low incomes and who move jobs frequently, but that this has led to the proliferation of millions of small inactive pension pots. The Group expects that by the end of this year there will be more than 11 million small, deferred pots in total and that without any change in the next ten years, that figure will likely double again.

Small pots are an issue for savers, pension providers and schemes as they add inefficiencies to the UK’s pension system and make it more likely that people will lose track of their savings. The report highlights that his increases the risk of savers achieving sub-optimal outcomes and missing out on their savings; with smaller pots much more likely to be cashed in comparison to larger pots.

The report confirms that three models are to be analysed further. Those models can be broadly summarised as follows:

  • Pot follows member - When an employee moves jobs their deferred pension pot in their former employer's scheme automatically moves with them to the new employer’s scheme. Individuals would be given the opportunity to opt-out and leave any / all deferred pots where they are.
  • Default Consolidators - Pots which are deferred for a specific period of time, are below a certain value and of a specified ‘type’ will transfer automatically to a small pot consolidator, with savers being given an opportunity to opt-out if they want to. Multiple deferred small pots belonging to the same person could be linked by the consolidator.
  • Member Exchange - The concept of Member Exchange is to identify members with a small inactive pot at one master trust and an active pot at another master trust and to transfer the inactive pot into the active pot.

Updated Guidance on Transfer Regulations

In response to concerns that have been expressed about applying the transfer regulations where overseas investments or small-scale incentives feature in the transfer, TPR has made changes to its guidance and the DWP will consider further as it takes forward its review of the regulations.

TPR states that the regulations are not intended to impose additional burdens on schemes or administrators, or to impact on standard business practices and should have no impact on the process for transfers that, prior to the introduction of the regulations, would have caused no concern.

The DWP committed to a review of the regulations and to publish a report within 18 months of them going live. This work is currently underway.

TPR warns trustees - be prepared - “your pensions dashboards deadline is coming”

TPR has published Pensions dashboards: initial guidance which outlines legal duties in relation to dashboards and includes a  checklist intended to help schemes manage their progress.

TPR note that trustees should now:

  • check their connection deadline. This is the date by which they will be legally required to be connected to the pensions dashboards
  • have pensions dashboards firmly on their board agendas
  • be deciding how they will connect: whether they will develop a solution in house, use a pensions administrator or integrated service provider
  • be taking stock of and digitising their data. This is crucial so that savers are successfully matched to their pensions.

It is noted that more detailed and up to date guidance will be published by TPR later this year, which will reflect the final regulations and the technical standards being developed by the Money and Pensions Service.

If you have any queries about any of the issues covered, or you require advice on a pensions related matter, please do not hesitate to contact your usual contact or one of the pensions experts below.

Further Reading