In 3 sentences:
The document provides an overview of regulatory updates and changes affecting UK pensions in 2016, including the cessation of contracting out, GMP reconciliations, VAT recovery guidance, integrated risk management, changes to the lifetime allowance and annual allowance, same sex survivor benefits, the development of an annuity secondary market, and a case related to pension transfers. HM Revenue & Customs has extended the transitional period for VAT recovery arrangements. The Pensions Regulator has issued new guidance on integrated risk management to help trustees balance scheme, employer and funding risks. Changes to the lifetime allowance and annual allowance took effect in the 2016/17 tax year.
The Chancellor gave a combined Spending Review and Autumn Statement on 25 November 2015. He announced a number of measures that will affect businesses, individuals and the UK as a whole.
We have produced a 12 page Autumn Statement report which includes details of these, including sections on business initiatives, pensions, changes to personal allowances and more.
How does George Osborne's latest Budget affect you?
Gemini have produced this handy summary to outline the main changes discussed in the House of Commons on 20th March 2013.
The Chancellor gave a combined Spending Review and Autumn Statement on 25 November 2015. He announced a number of measures that will affect businesses, individuals and the UK as a whole.
We have produced a 12 page Autumn Statement report which includes details of these, including sections on business initiatives, pensions, changes to personal allowances and more.
How does George Osborne's latest Budget affect you?
Gemini have produced this handy summary to outline the main changes discussed in the House of Commons on 20th March 2013.
Federal budget guide 2018 mazars australia_9th mayRickard Wärnelid
Mr Scott Morrison, the Federal Treasurer, has handed down his third Budget on 8 May 2018. Mr Morrison said the Budget is focused on further strengthening the economy to “guarantee the essentials Australians rely on” and “responsibly repair the budget”.
With a deficit of $18.2b in 2017/18 and $14.5b in 2018/19, the Budget is forecast to return to a balance of $2.2b in 2019/20 and a projected surplus of $11b in 2020/21.
The government is proposing a three-step, seven-year plan to make personal income tax “lower, fairer and simpler”. The Budget also contains additional measures to counter the black economy, particularly in response to the final report from the Black Economy Taskforce, including expanding the taxable payments reporting system. Additionally, the Budget contains a range of measures intended to ensure the integrity of the tax and superannuation system.
Our Budget Summary is now available and provides a detailed breakdown of all of the key measures included in Wednesday’s Budget, as well as highlighting other measures announced in earlier Budgets which come into play from 6 April 2017.
Health Reform Bulletin 116 Year End Wrap Up 12-29-15Daniel Michels
The most recent CBIZ Health Reform Bulletin: Year-End Wrap Up (HRB 116). This issue includes specific information and guidance on:
1. Late breaking development, IRS delays new Affordable Care Act's (ACA) reporting and disclosure obligations!
2. On December 18, 2015 Consolidate Appropriations Act, 2016, and the Protecting Americans from Tax Hikes (PATH) Act of 2015 (H. R. 2029; now Public Law No. 114-113) were signed by the President, and amend several provisions of the Affordable Care Act.
3. The IRS Issued guidance relating to ACA implementation
4. Year-End Reminders
Through AGL's "day-after" Action-Focused Budget Bulletin you will be able to review how yesterday's summer budget could affect you and your financial planning needs and objectives. We also offer Tax Tips and Planning Points to keep your Financial Plan on track as well as Tax Tables.
Federal budget guide 2018 mazars australia_9th mayRickard Wärnelid
Mr Scott Morrison, the Federal Treasurer, has handed down his third Budget on 8 May 2018. Mr Morrison said the Budget is focused on further strengthening the economy to “guarantee the essentials Australians rely on” and “responsibly repair the budget”.
With a deficit of $18.2b in 2017/18 and $14.5b in 2018/19, the Budget is forecast to return to a balance of $2.2b in 2019/20 and a projected surplus of $11b in 2020/21.
The government is proposing a three-step, seven-year plan to make personal income tax “lower, fairer and simpler”. The Budget also contains additional measures to counter the black economy, particularly in response to the final report from the Black Economy Taskforce, including expanding the taxable payments reporting system. Additionally, the Budget contains a range of measures intended to ensure the integrity of the tax and superannuation system.
Our Budget Summary is now available and provides a detailed breakdown of all of the key measures included in Wednesday’s Budget, as well as highlighting other measures announced in earlier Budgets which come into play from 6 April 2017.
Health Reform Bulletin 116 Year End Wrap Up 12-29-15Daniel Michels
The most recent CBIZ Health Reform Bulletin: Year-End Wrap Up (HRB 116). This issue includes specific information and guidance on:
1. Late breaking development, IRS delays new Affordable Care Act's (ACA) reporting and disclosure obligations!
2. On December 18, 2015 Consolidate Appropriations Act, 2016, and the Protecting Americans from Tax Hikes (PATH) Act of 2015 (H. R. 2029; now Public Law No. 114-113) were signed by the President, and amend several provisions of the Affordable Care Act.
3. The IRS Issued guidance relating to ACA implementation
4. Year-End Reminders
Through AGL's "day-after" Action-Focused Budget Bulletin you will be able to review how yesterday's summer budget could affect you and your financial planning needs and objectives. We also offer Tax Tips and Planning Points to keep your Financial Plan on track as well as Tax Tables.
The new tax law that is informally referred to as the Tax Cuts and Jobs Act (TCJA) included many perks for businesses, but it also established new protocols for the recognition of gross income that may be detrimental. These new provisions may accelerate when income taxes are payable for certain businesses, as the recognition of gross income may be required earlier than would have been previously required for tax purposes.
CIPM Public Policy brief 2019:Lagos Internal Revenue Service appoints employe...Olayiwola Oladapo
Effective from 1 January, 2019 the LIRS has appointed employers of Labour as its agents to deduct and remit Capital Gains Tax on loss of employment payments they made to employees as termination benefits. This public notice came on the heels of three other public notices issued by the LIRS in 2017. This brief from the Chartered Institute of Personnel Management (CIPM) examines the emerging trend in taxation laws and regimes in Lagos state since 2017 especially as it relates to employee compensation. It provides likely prognosis for organizations, the employee and HR Leaders/ managers. This brief also serve as a signpost for what to likely expect from other state Internal Revenue Services in 2019 as sub national governments at the state level desperately explore previously uncharted tax laws loopholes and strategies to raise their internally generated revenue base to address their burgeoning recurrent and capital budget requirements.
A synopsis of the Financial Conduct Authority’s (FCA) latest news and publications issued in April and May 2018.
With GDPR and MiFID II processes now firmly embedded in our daily lives, many of our readers will look back at the months of April and May with a sense of relief.
The biggest accounting changes coming out of the third quarter affected not-for-profit organizations, but other projects received minor updates, too. In addition, several exposure drafts have been issued, including the expected exposure draft of targeted improvements to hedge accounting.
In 2016, the Financial Accounting Standards Board (FASB) released 20 accounting standards updates (ASUs). Among the more significant were changes to leasing, financial instruments and the not-for-profit reporting model.
Despite the completion of many significant projects, the FASB will likely remain active during 2017. Presently, it has 26 active projects, the most significant of which may be considered the proposed changes to hedge accounting originally issued in the third quarter of 2016. During the fourth quarter of 2016 and first couple weeks of 2017, the FASB issued seven accounting standards updates.
Yet another busy month with five major superannuation reforms introduced to Parliament. The Bills relate to promoting Member Outcomes, Housing Affordability, Independent Directors on Trustee Boards, Complaints or Dispute Resolution, and extending Choice of Fund.
Health Reform Bulletin 116 | Year-End Wrap Up Dec. 29, 2015CBIZ, Inc.
The government is winding up 2015 and ringing in 2016 with a bang. The final HRB of 2015 will keep you abreast of the various changes that occurred at the end of the year.
1. VIEWPOINT 2016.
Included in this edition: GMP Reconciliations and Cessation of
Contracting-Out, VAT Recovery, Integrated Risk Management,
Pension Input Periods and Tax Year changes, Same Sex
Survivor Benefits, Second Hand Annuity Market and Pension
Transfers – Hughes v Royal London
2. VIEWPOINT – APRIL 2016
VIEWPOINT APRIL 2016
2
CESSATION OF CONTRACTING
-OUT & GMP RECONCILIATIONS
REGULATORY UPDATE
A new State Pension came into effect from 6 April 2016.
The new pension will be a flat rate amount of £155.65 per
week, payable to all people reaching State Pension Age
after April 2016 and will replace the current two tiered
Basic State Pension, SERPS and S2P. Alongside this
change the ability for defined benefit pension schemes to
contract-out has ceased and all contracted-out certificates
will automatically be cancelled.
In December 2015 HM Revenue & Customs closed the
records of approximately 6.2 million individuals who were
still contracted-out and these details will be made available
to Scheme Administrators to reconcile against their own
records. The DWP has confirmed that it will no longer track
contracted-out records after April 2018 and, in the run-up
to this point, will be issuing a statement to around 18
million people who, at some point, have been contracted-
out.
It is important that schemes’ contracted-out records agree
with the DWP’s before the 2018 mailings are issued. This
will avoid any possible additional liabilities appearing as a
result of an incorrect DWP statement being issued.
Anyone over the age of 50 may request a State pension
forecast. The statements being issued – Contracted-Out
Pension Equivalent (“COPE”) forecasts – provide members
with an overall total of their contracted-out benefit including
any post April 1997 benefit.
Most scheme members will be acquainted with
Guaranteed Minimum Pensions due to the fact that this
amount (where applicable) is explicitly shown in
quotations. However, historically, reference has not been
made to scheme reference test benefits (post 1997
contracted-out benefits). A COPE benefit is the total of
GMP and post 1997 contracting-out benefits. This may
cause confusion for scheme members.
SCHEME RECONCILIATION SERVICE
The Scheme Reconciliation Service has been established
to ensure that a scheme’s contracted-out benefits agree
with the DWP’s. Once registered a scheme has until April
2018 to complete the reconciliation, advising the DWP if
any amendments to their records are required.
In December 2015 HM Revenue & Customs
‘closed’ 6.2 million contracted-out member
records
Between 2016 and 2018, DWP will issue 18
million individual statements to members who
have been contracted-out at some point.
3. VIEWPOINT – APRIL 2016
VIEWPOINT APRIL 2016
3
Once this is done the scheme’s records will match the
DWP’s ensuring:-
1. Certainty of funding obligations.
2. The scheme is correctly meeting its legal
obligation on the provision of contracted-out
benefits.
3. The avoidance of any overpayment of contracted-
out entitlements.
4. A reduction in the number of member queries
following receipt of the DWP statements in 2018.
The Trustees will need to decide if they wish to have their
scheme reconciled once they have considered the points
above.
For schemes no longer open to accrual, the completion of
a reconciliation of contracted-out benefits now will avoid
difficulties being experienced later on. The DWP may not
have resources to deal with queries generated after 2018
which means a scheme will be liable for any GMP notified
to a member in their 2018 statement from the DWP.
Legal & General is able to carry out this reconciliation for
you. Please contact your scheme manager who will be
happy to provide you with details on how to proceed.
What next?
Legislation is now in place to ensure that NI rebates
already paid will result in members receiving at least the
specified minimum level of benefits – GMPs or Section
9(2B) rights – which were required to be provided as a
condition of contracting-out.
The May 2014 consultation put forward proposals which
were intended to preserve the key elements of the
regulations when contracting-out ceased and these have
now been published. These rules include limitations on
forfeiture of rights, commutation of contracted-out pension
rights for a lump sum and alterations of scheme rules.
In the longer term, Trustees may need to consider the
impact of the changes to the State pension. Many schemes
will have a deduction from pensionable salary to allow for
State pensions and with the change to a single tier State
pension it is not clear how pension offsets will continue to
apply.
Similarly some schemes may need to consider the impact
of the increase in State Pension Age in relation to the
provision of bridging pensions. Some may need to pay
bridging pensions for longer periods and others may need
to consider introducing one to facilitate retirement.
http://www.legislation.gov.uk/uksi/2015/1677/pdfs/uksi_20
151677_en.pdf
VAT RECOVERY
Following the VAT Brief earlier this year (Brief 8/15),
summarised in May 2015’s Viewpoint, HM Revenue &
Customs has issued a further Brief on the treatment of VAT
Recovery. Following the change in policy a transitional
period was introduced to enable schemes to continue to
apply their current VAT recovery arrangements and the
main announcement in the recent Brief is an extension to
the transitional period for a further 12 months to December
2016.
HMRC made it clear that it is necessary for an employer to
both contract and pay for services in order to be the
recipient of the services for VAT purposes.
HM Revenue & Customs have issued a further
brief on the treatment of service agreements in
relation to VAT
The transitional period for current recovery
arrangements has been extended for a further
12 months
Further guidance will be issued on the issue of
tripartite agreements
4. VIEWPOINT – APRIL 2016
VIEWPOINT APRIL 2016
4
Brief 8/15 followed on from this and considered whether
tripartite contracts between employers, service providers
and pension scheme Trustees could be accepted as
evidence that an employer was the recipient of a supply for
VAT purposes, enabling them to deduct VAT charged on
administration and asset management costs going forward.
Concerns have now been raised about the implications this
form of arrangement may have for an employer’s
Corporation Tax deduction where only costs recognised in
the Profit and Loss Account and contributions to pension
schemes may attract a deduction for Corporation Tax
purposes. Direct payment by an employer of asset
management costs do not clearly fall into either of these
categories and as such HMRC is taking the position that
where an employer pays directly for asset management
costs under a tripartite contract the employer is not entitled
to a Corporation Tax deduction.
HMRC is considering whether different forms of agreement
would enable a Corporation tax deduction and are due to
issue further guidance shortly with possible alternative to
tripartite agreements.
Legal & General does not currently have any plans in place
to amend its Service Agreement as the issue relate
primarily to the relationship between the Trustees and the
Sponsoring Company.
https://www.gov.uk/government/publications/revenue-and-
customs-brief-17-2015-deduction-of-vat-on-pension-fund-
management-costs/revenue-and-customs-brief-1715-
deduction-of-vat-on-pension-fund-management-costs
INTEGRATED RISK
MANAGEMENT
The Pensions Regulator has published new guidance for
Trustees of defined benefit schemes on the development
and implementation of an integrated framework for
managing risk.
Integrated Risk Management (IRM) is intended to help
Trustees assess, prioritise and manage the employer
covenant, investment and funding risks.
It enables them to engage with the sponsoring employer to
develop a common understanding of the relationships
between these risks in order to maintain a balance of risk
which is sustainable for both the scheme and employer.
The new regulatory guidance on IRM is not prescriptive but
is intended to provide practical help on what a
proportionate and integrated approach to risk management
might look like and how Trustees can use it as part of their
plans for meeting their scheme’s funding objectives.
Some of the key outcomes for IRM are:
Better decision making resulting from greater
Trustee and employer understanding of risks.
Better working relationships between Trustees
and employers because of open and constructive
dialogue.
More effective risk assessment, contingency
planning and monitoring arrangements resulting
from an evidence-based focus on the most
important risks.
Greater efficiency due to more effective use of
Trustee, employer and adviser resources
http://www.thepensionsregulator.gov.uk/guidance/guidanc
e-integrated-risk-management.aspx
2016/17 TAX YEAR
At the start of the new tax year the Lifetime Allowance
has reduced to £1 million for 2016/17 and 2017/18 and will
then be index-linked in line with the Consumer Prices
Index (CPI).
5. VIEWPOINT – APRIL 2016
VIEWPOINT APRIL 2016
5
To protect those members who may have accrued pension
benefits near to or over the revised Lifetime Allowance a
new form of individual protection – IP16 – is being made
available. Members have until 5 April 2017 to register for
the new protection – initially by interim process then from
July this year via the HMRC Online application..
Fixed Protection is available to members who wish to
protect the higher Allowance of £1.25 million. No further
accrual is permitted under any schemes with rules around
what is permitted for defined benefit schemes. No
minimum pension value is required.
The alternative option is Individual Protection whereby
members can continue to accrue benefits; the member has
to have a pension entitlement valued at £1 million on 6
April 2016 to be eligible.
The standard Annual Allowance will be £40,000 for the
tax year 2016/17. However, where a member has flexibly
accessed a money purchase arrangement, special
conditions apply, including a £10,000 money purchase
Annual Allowance. The Annual Allowance for High Earners
came into effect from 6 April with the standard Allowance
reducing to between £10,000 and £40,000.
The High Earners allowance will affect those with ‘adjusted
income’ of more than £150,000 (where adjusted income
includes employer and employee contributions) and ‘net
income’ of more than £110,000 (net income excludes
pension contributions).
Where income exceeds the thresholds the members’
annual allowance will be reduced by £1 for every £2 of
adjusted income in excess of £150,000. The maximum
reduction is £30,000 resulting in an annual allowance of
£10,000.
To accommodate the introduction of the new High Earners
Annual Allowance all Pension Input Periods will be aligned
with the tax year from 2016/17 with no option to vary the
dates. The alignment will be achieved by ending all open
periods on 8th
July. A further period will then run from 9
July 2015 to 5th
April 2016, in effect creating 2 “mini” tax
years for the period – the ‘pre-alignment’ and ‘post-
alignment’ periods. To ensure no tax charges arise against
those members who had fully funded the pension in
advance of the change the total Annual Allowance for this
tax year will be increased to £80,000 of which £40,000 can
be used for post-Budget pension inputs.
The application of the transitional rules for pension input
periods does give rise to a potential issue for defined
benefit schemes – the need to undertake an additional
valuation of the Annual Allowance on 8 July 2015. Some
scheme members will potentially have up to 3 pension
input periods ending in the 2015/16 tax year so to
accommodate the rule change for the transitional year a
‘combined period’ has been devised removing the
requirement for a separate valuation.
The pension input amount for the pre- and post-alignment
tax years will be a proportion of the pension input amount
calculated as if all the pension input amounts for periods
ending in the 2015 and 2016 had been made in a single
year. This gives rise to the amount in the ‘combined period
with the post alignment amount being a proportion of this
total amount. The rules for the transitional year have also
been written to accommodate scheme members who
become deferred during the period so this will also assist
Administrators by negating the need for additional
valuations.
Scottish Rate of Income Tax (“SRIT”) From 6th April
2016 a new Scottish Rate of Income Tax comes into force
in Scotland. For 2016/17 the rate of income tax has been
set to the same rate applying to the rest of the UK but it is
likely that the regions will diverge in coming years as more
power is devolved to Scotland.
The criteria applied to determine Scottish taxpayers are
based on where the individual lives, and not where they
work or their feeling of national identity. HM Revenue &
Customs is responsible for assessing whether someone is
liable for SRIT and will issue an updated tax code prefixed
with an “S”.
6. VIEWPOINT – APRIL 2016
VIEWPOINT APRIL 2016
6
The change has longer term implications on how schemes
are administered and the tax relief on customer
contributions. For schemes where contributions are paid
on a gross basis the impact is negligible as the relief will be
applied based on the customer’s actual rate of tax. Where
schemes operate on a “relief at source” basis the process
is more complicated - from 2018 systems will need to be in
place to apply any adjustments.
INNOSPEC vs WALKER – SAME
SEX SURVIVOR BENEFITS
The Court of Appeal has ruled in the case of Innospec v
Walker that pension schemes are not obliged to provide
same-sex spouses or civil partners of pension scheme
members with survivor benefits in respect of service before
5 December 2005.
The Employment Appeal Tribunal had previously held that
UK law was clear in allowing schemes not to equalise
survivor’s benefits for same-sex spouses or civil partners
fully and to ignore this would be to “legislate rather than
interpret” and the Court of Appeal has now confirmed this.
Mr Walker was an active member of the Innospec pension
scheme for over 20 years before the law enabled him to
enter into a civil partnership. When he retired in 2003 on a
pension of £80,000 he was informed that his partner would
only be eligible for a contracted-out survivor’s benefit of
£500 as opposed to a 2/3rds pension that a widow could
have received. As a result he brought a discrimination
claim that he may now need to appeal following the Court’s
decision.
The issue does reaffirm some important principles of EU
law which are worthy of note. The 'no retroactivity' principle
– EU legislation does not have retroactive effect unless it is
clear that the legislator intended such an effect and the
'future effects' principle – amending legislation applies
immediately to the future effects of a situation under the
law as it stood before amendment.
SECOND HAND ANNUITY
MARKET
Following the publication of the initial rules and the
associated consultation period HM Revenue & Customs
and the FCA have begun a consultation on the tax
framework and rules for the secondary annuity market.
The HMRC consultation lays out the proposed detail of the
tax framework and has extended the range of potential
consumers that could benefit including some in defined
benefit schemes or with deferred annuities.
The FCA has also published its regulatory plans for the
interaction between buyers, sellers and intermediaries
The Government expects around 300,000 consumers who
have an annuity will look to exchange their income for a
lump sum giving rise to a tax windfall of £900 million in the
first two years.
The new rules may pose additional headaches for
Trustees of occupational schemes who will need to weigh
up whether or not to assign the annuities they have
secured for members. Where the scheme has secured the
pension income via an annuity the contract will still be
owned by the Trustees. By refusing an accommodation
under the new rules they could be accused of limiting
member access to the new freedoms yet by doing so may
be seen as encouraging poor member outcomes.
In March 2015 Budget proposals were
announced to create a ‘second hand’ annuity
market
In an effort to extend the pension freedoms
reform consumers will have the option to sell
their annuity income stream in exchange for a
lump sum
7. VIEWPOINT – APRIL 2016
VIEWPOINT APRIL 2016
7
PENSION TRANSFERS
In February 2016 the High Court issued a ruling in the case
of Mrs Hughes vs. Royal London in relation to the request
from Mrs Hughes to transfer her Royal London pension to
a new SSAS.
Royal London had initially refused the transfer on the
grounds that the sponsoring company had been set up just
before the transfer application and the receiving scheme
had been established and it concluded that the scheme
Mrs Hughes wanted to transfer to could not be correctly
categorised as an occupational pension scheme and as
such she did not have a statutory right to a transfer.
The Ombudsman rejected Mrs Hughes’ subsequent
complaint by virtue of the fact that she was not an “earner”
within the definition of the 1993 Pensions Act. The scheme
in question was in fact a bona fide occupational scheme
but for the statutory right to a transfer to apply earnings
had to be derived from the sponsoring company.
The High Court has now over-ruled this decision agreeing
that “Mrs Hughes was an earner by reason of her earnings
from another source or sources” and has allowed Mrs
Hughes’ appeal.
Practically this ruling means that Trustees and members
will be more exposed to risk of scams. Even applying a
rigorous approach to due diligence reviews for transfer
requests will not allow Trustees to refuse a request even
where there are suspicions that the new scheme is being
used for liberation or exposing members to inappropriate
levels of investment risk.
SNIPPETS
PENSION FREEDOMS
178,990 – Pension policies have been accessed in the third
quarter of 2015 down from 204,581 in the second quarter
after the introduction of Pension Reform
53,697 – Consumers have accessed some form of income
drawdown
125,293 – Consumers have accessed some form of lump
sum
Consumers aged between 55 and 59 made the highest
level of withdrawals in the first 3 months compared to
89,896 for the same period in 2014
3,416,000 – Consumers aged 55 and over who do not
experience any form of exit charge (84%)
KEY DATA FOR 2016/17
Standard Lifetime Allowance is £1 million
(£1 million for 2017/18)
Annual Allowance is £40,000
Lower Earnings Limit (LEL) is £5,824
Upper Accrual Point (UAP) is £40,040
Upper Earnings Limit (UEL) is £43,004
PPF Compensation Cap is £36,401.19 @ 65
8. VIEWPOINT – APRIL 2016
VIEWPOINT APRIL 2016
8
Please note that the content of this Viewpoint is of general interest and is not intended to apply to the specific circumstances of any particular scheme.
Legal & General is not authorised to give legal advice.
Nothing in the content should, therefore be regarded as constituting legal advice and should not be relied upon as such. Trustees are strongly advised
to obtain independent advice, which may include legal advice, on any issue arising from the information provided in the Viewpoint and which they
consider applies to them or their scheme
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Registered in England and Wales No. 166055
Registered Office: One Coleman Street, London EC2R 5AA
We are authorised and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority