Pensions Bulletin 2018/07

Our viewpoint

Changes to IAS 19 make pensions accounting more complicated and less transparent from 2019

The International Accounting Standards Board has issued an amendment to pensions accounting standard IAS 19, containing changes, first considered in 2015 (see Pensions Bulletin 2015/27), which alter the calculation of the pension cost when there has been a special event such as a benefit change, closure to accrual, restructuring, or liability management exercise.

Specifically, these new rules will require that where one of these events has occurred, triggering a past service cost or settlement, the pension cost from that point in the year onwards will be calculated using the actuarial assumptions and asset values at the time of the event.

This is sometimes known as the “stop and restart” approach to calculating the pension cost, and is a change from current practice, under which assumptions at the start of the financial year, rather than the time of the special event, are generally used.

The new rules will apply for accounting years beginning on or after 1 January 2019.  Retrospective restatement of prior year figures will not be required.


The new rules will bring unwelcome extra complexity, both for companies reporting their pension obligations and for readers of company accounts trying to make sense of the numbers.  Even a very small change to a pension scheme – such as a minor adjustment to benefits – could have a disproportionately large effect on the profit of the sponsoring employer.  The effect on profit could be good or bad and will depend on market conditions at the time the event occurs, making results unpredictable and accurate budgeting impossible.

MPs succeed in hurrying along cold-calling ban

The Government has largely accepted the findings of the Work and Pensions Select Committee’s report on protecting against pension scams (see Pensions Bulletin 2017/52) in its response published this week, but what is of most significance is the action to be taken on the cold-calling ban.

The Government has agreed that the non-Government sponsored clause to ban cold-calling in the Financial Guidance and Claims Bill was likely to take a long time to implement as it was linked to the introduction of the new financial guidance body.  The Government has also agreed with concerns that the clause does not provide details about the kind of issues regulations laid to ban cold-calling should cover, including if/how they would be enforceable.  As a result it will shortly bring forward its own amendment to the Bill, allowing for a swifter implementation and ensuring the ban is workable and robust.  This will then be followed by regulations introducing the ban.

The response also acknowledges the Government recently implementing a version of the Select Committee’s recommendation to strengthen the nudge members receive to access Pension Wise before make decisions on their pensions at retirement or on transfer (see Pensions Bulletin 2018/05).


The acceleration of the cold-calling ban is a clear example of Parliamentary politics in action.  Last August, the legislation was only to be brought forward “when Parliamentary time allows”.  But by the end of October their Lordships had snuck in a cold-calling clause to the Financial Guidance and Claims Bill (which happened to be passing by).  In November we were promised sight of the draft legislation in early 2018.  Now, thanks to the MPs, and given that the Bill has almost completed its passage through Parliament, it seems we will get the real deal very shortly.  But quite when the ban will come into force remains to be seen.

Pensions Advisory Service dispute resolution service moves to the Pensions Ombudsman

The Pensions Ombudsman has announced that it is taking over responsibility for the Pensions Advisory Service’s (TPAS) dispute resolution function.  The move includes the transfer of the TPAS dispute resolution team and volunteer network of over 350 advisers. The transfer will be completed by 1 April 2018.

TPAS tends to focus on complaints before the pension scheme’s internal dispute resolution procedure has been completed, whilst the Ombudsman typically deals with complaints that have been through this procedure.

The hope is that having the two dispute resolution services in one place will result in a simpler and faster service.

The two organisations will update their signposting to the public and pensions industry to reflect their services.  Pension schemes and providers are to be given information to enable them to make the necessary changes to their signposting.


This has been on the cards for at least the last six months and would seem to be a sensible move, both in principle, but also ahead of TPAS being subsumed within the new body being set up by the Financial Guidance and Claims Bill.

More fines for regulatory compliance failures

Two cases hit the news last week where serious regulatory compliance failings have led to fines being levied.

In the first, four trustees of Pakistan International Airlines DB scheme have been fined £500 each for their scheme not obtaining audited accounts on time for either the 2015 or 2016 scheme year.  The case came to the Pensions Regulator’s attention when the scheme actuary blew the whistle and is of particular note because it appears to be the first reported case where the Regulator has applied its recently settled monetary penalty policy (see Pensions Bulletin 2017/34).  The Regulator concluded that the trustees did not have a reasonable excuse for the failures.

In the second, Brighton Magistrates Court ordered a bus company, Stotts Tours (Oldham), and its managing director to pay substantial fines (in addition to the civil penalties already levied by the Regulator), after they pleaded guilty to 16 offences of wilfully failing to comply with auto-enrolment law – the first such prosecution by the Regulator.


This is yet more evidence of the Regulator not only taking a more muscular approach to compliance failures but also publicising the fact.  But these cases don’t hold any specific lessons for the vast majority of schemes and their sponsors.

Will civil partnership reform spell more costs for DB schemes?

A private member’s bill that seeks to reform civil partnership law could result in a number of DB schemes facing significant additional costs.

The centrepiece of the Civil Partnerships, Marriages and Deaths (Registration etc) Bill 2017-19 is a requirement for the Secretary of State to “make arrangements for the preparation of a report assessing how the law ought to be changed to bring about equality between same-sex couples and other couples in terms of their future ability or otherwise to form civil partnerships”. The Bill further provides that “after the report has been published, the Secretary of State may make regulations to change the law relating to civil partnership to bring about such equality”.


Although the Bill is only requiring a report to be prepared (and is not setting any timescale for its production), any such report may then lead to pressure for an extension of the civil partnership law to opposite-sex couples.

And as the Explanatory Notes that accompany the Bill explain, if civil partnerships were so extended there would be additional potential costs relating to pension rights that may be accrued by opposite-sex couples who form a civil partnership, and who would not have otherwise formed a religious or civil marriage.  This could in turn have some impact on the finances of DB schemes, depending on how their current rules governing dependants’ pensions operate.

FCA and Pensions Regulator to join up their strategic thinking

The Financial Conduct Authority and the Pensions Regulator have announced that they are working together on a pensions regulatory strategy, which will set out how they will work together to tackle the key risks facing the pensions sector in the next 5-10 years.

A series of events with stakeholders is promised for the spring which will broadly focus on the FCA and Pensions Regulator’s collective view of the current pensions landscape, their respective regulatory remits and their likely key areas of focus in the coming years.

For the FCA, the focus in recent years has been on making sure that its regulation provides the appropriate level of consumer protection and competition, whereas the Pensions Regulator’s focus has been on protecting workplace pension savers through a drive to improve standards of governance in schemes, ensuring schemes are being treated fairly by sponsoring employers, and that workers are enrolled into the pensions they are entitled to by employers as part of automatic enrolment.


This is all to the good particularly as regulation in the DC space needs to increasingly be joined up between contract and workplace provision.  Hopefully a joint regulatory strategy will assist.

Relief at source regulations finalised

Regulations impacting those schemes that reclaim tax relief using the relief at source method, such as group personal pensions, have been laid before Parliament and come into force on 6 April 2018.

The Registered Pension Schemes (Relief at Source) (Amendment) Regulations 2018 (SI 2018/150) are virtually identical to the draft on which HMRC consulted in December (see Pensions Bulletin 2017/51).

This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law.  For further help, please contact David Everett at our London office or the partner who normally advises you.

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