Jan 1, 2013 - basis up to now â bringing into play legislation on matters such as scheme funding, preservation, revalu
Pensions agenda
New Year’s resolutions for 2013 Date: January 2013
Advisers: Eversheds LLP
1 Automatic enrolment – By the end of 2013 the automatic enrolment requirements will apply to all employers with workers in the UK that had more than 500 people in their largest payroll scheme on 1 April 2012. Employers need to allow at least 12 months to update their HR, pensions and payroll systems to ensure compliance. Read more.
Resolution: Draw up an action plan working back from your organisation’s staging date.
2
Salary sacrifice – By using salary sacrifice to pay members’ pension contributions, employers can save up to 13.8% in national insurance contributions on the amount sacrificed. Many employers are implementing salary sacrifice arrangements to offset the additional costs associated with auto-enrolment and we expect this trend to continue in 2013.
Resolution: Consider using salary sacrifice if it is not already in place.
3 Significant legislative change affecting defined contribution (DC) schemes – A new statutory definition of ‘money purchase benefits’ may well come into force this year. This could effectively convert to DB pension arrangements that have run on a DC basis up to now – bringing into play legislation on matters such as scheme funding, preservation, revaluation and the PPF.
Resolution: Review DC scheme rules and consider impact on how the scheme is run.
4 GMP equalisation – Despite legal uncertainty, as we understand it, the Government
is planning to press ahead with its plan to amend the equal treatment legislation to effectively require pension schemes to equalise Guaranteed Minimum Pensions (GMPs) for men and women. When the Government confirms its approach, schemes that provide GMPs will need to react quickly. Read more.
Resolution: Be ready to react promptly when the Government confirms its legislative intent.
5 PPF levy deadlines – The PPF’s annual end March deadline for submitting scheme data in connection with the calculation of a scheme’s PPF levy is fast approaching. The PPF levy estimate for 2013/14 is £630m, an increase of almost 15% on this year.
Resolution: Ensure your scheme’s data is correct and up to date, consider taking steps to reduce your scheme’s levy, such as using contingent assets or parent company guarantees and re-certify existing arrangements.
Pensions agenda January 2013
6 Data protection – Last year a local authority was fined £250,000 when pensions data was
incorrectly disposed of by a third party contractor. Employers and pension schemes must have robust data protection agreements with all third parties that handle members’ data – particularly with auto-enrolment upon us. Organisations can currently be fined up to £500,000 (which could rise to 2% of global turnover under EU proposals) if they breach their data protection obligations. Read more.
Resolution: Review data protection processes and agreements with third parties.
7 A new measure of inflation (CPIH) – The Office for National Statistics has confirmed its plan to introduce a new additional measure of UK inflation, CPIH, in March 2013, and to consider options to narrow the gap between RPI and CPI.
Resolution: Review scheme provisions that refer to RPI or CPI and be ready to react.
8 Beware the ‘bond bubble’ – Some commentators are suggesting that bonds are overpriced
raising concerns that a ‘bond bubble’ is forming. When this bursts, it could have a significant impact on schemes invested heavily in bonds and on members who are in a lifestyling fund that are approaching retirement, who are likely to hold a large amount of money in bonds.
Resolution: Review investment strategy (DB). Review suitability of default funds and consider need to alert members to risks (DC).
9 DC governance – With the introduction of auto-enrolment, the regulatory focus on DC
schemes is intensifying and it is vital that trustees and pension providers can demonstrate that their scheme is well run.
Resolution: Review your existing DC practices in light of recent regulatory guidance on default funds, charges, decumulation and member communications.
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Changes to IAS 19 – Significant changes to the international accounting standard for pensions and employee benefits, IAS19, apply to companies using this standard in respect of financial reporting periods beginning on or after 1 January 2013. These changes are likely to reduce the profit and increase the pension deficit that is reported in the accounts of such companies. Read more.
Resolution: Affected companies should consider taking steps to de-risk their pension scheme and to reduce the scheme’s deficit, such as implementing an asset-backed funding arrangement.
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If you have qu eries about th ese or any ot pension sche her issues affe me please co cting your ntact your us ua l Eversheds’ Anthony Art adviser or co er ntact: Head of Pens Jeremy Goodw ions in 0845 497 05 London 36 anthonyarter@ 0845 497 45 eversheds.com 64 jeremygoodw Francois Bark in@eversheds. er com Birmingham Ele Lovering 0845 497 15 Manchester 59 francoisbarke 0845 497 81 r@eversheds. 20 com elelovering@ev Ian Davies ersheds.com Cardiff Terry Saeedi 0845 498 76 Leeds 01 iandavies@ev 08 45 498 4343 ersheds.com terrysaeedi@ev ersheds.com
