21 February 2019
First master trust granted authorisation
By virtue of being the only authorised master trust at the time of writing, LifeSight is also the only scheme listed on the Regulator’s new list of authorised master trusts.
Master trust scheme trustees have until 31 March 2019 to apply to the Regulator for authorisation or begin a process of exiting the market which includes moving members to an alternative scheme. The Regulator’s research has revealed that there had been about 90 master trusts in the market. As at 31 January 2019, 8 applications for authorisation had been received, 7 schemes have exited and 31 have told the Regulator they intend to exit the market. The remaining 44 master trusts will have to either apply for authorisation or trigger their exit from the market in the coming weeks.
The LifeSight master trust was the first to apply for authorisation last autumn and it is interesting to see that it has taken the Regulator around four months to approve it. It is too early to say whether this timescale will be typical for subsequent approvals or whether the process will get quicker. What is certain is that there will definitely be a lot of activity in the next few weeks, as the remaining 44 master trusts either have to put in their ante to stay in the game or fold and leave the table.
HMRC still working on the interaction of the pensions tax regime and GMP inequality projects
This week, with much press attention, Royal London published extracts of its correspondence with HMRC focussing on the more than 101,000 individuals holding Fixed Protection (following the cuts in the lifetime allowance). Royal London is asking for urgent reassurance from HMRC that, if any of those people are granted a GMP equalisation adjustment (in all likelihood of tiny amount), they would not lose their protection and so end up with a large and clearly unfair tax bill.
HMRC’s initial response is quoted as “We are currently considering the potential tax implications of individuals receiving an increase in their pension, following GMP equalisation to address gender inequalities. This includes any consequences for the LTA and associated protections. We will publish information, and any guidance necessary, through our usual Pension Schemes Newsletters as soon as possible”. And in a shorter follow-up reply “While we are considering any potential implications of GMP Equalisation, including on the LTA, it would not be appropriate at this point to confirm whether there is a potential issue. We will publish further information as soon as possible”.
Some press have, while reporting Royal London’s comments, linked in reporting the Hymanson case (see Pensions Bulletin 2018/48), but the issues involved seem very different.
GMP and pensions tax legislation are far from simple areas. In bringing the two together the Lloyds case creates a fiendishly complex combination with a whole series of uncertainties and worries (see the ACA’s letter to HMRC in Pensions Bulletin 2018/47).
It would be madness (and surely not Government policy) if small adjustments to benefits for an issue that dates back to 1990 create big tax bills or mean schemes revisiting tax calculations for the last 29 years. We hope that HMRC will be able to confirm as soon as possible that individuals such as those with fixed protection can sail safely through any reasonable approach a scheme takes to sorting out the requirement to “equalise” GMPs.
Scope of Brydon audit review confirmed
The Terms of Reference for the independent review by Sir Donald Brydon into the quality and effectiveness of the audit function have now been published. This review was announced by the Department for Business, Energy & Industrial Strategy in December, and is intended to build on the findings of the Kingman Report into the Financial Reporting Council, and the Competition and Markets Authority consultation on audit reforms (see Pensions Bulletin 2018/51).
The review has been commissioned in response to the perceived widening of the “audit expectations gap” – ie the difference between what users expect from an audit and the reality of what an audit actually is and what auditors’ responsibilities entail.
The objectives of the review include assessing how far the scope of the audit can and should evolve to meet the needs of users of accounts, what other forms of assurance might need to be developed, and to define and manage any residual expectations gap.
It will also test the current statutory audit model and consider whether it can be made more effective as currently established or whether it requires amendment. In addition, it will consider how the audit product should be developed to serve the public interest in future.
It is intended that “as a result of the review’s recommendations any expectations gap will be better understood and users of accounts will have greater assurance about the future of the entity concerned”. Sir Donald is expected to submit a report to the Secretary of State by the end of 2019, though any resulting changes are likely to take time to be implemented.
Separately, the Business, Energy and Industrial Strategy Committee has been gathering evidence – including orally from Sir Donald and the FRC – as part of its inquiry into the future of audit and improving quality and competition in the audit market, launched in November. As part of this process Rachel Reeves, the Chair of the Committee, has written hard-hitting letters asking direct and probing questions of the “Big Four” accounting firms.
In light of the collapse in recent times of a number of large, well known, seemingly stable corporate entities, there is clearly an increased appetite for improving the effectiveness, scope and transparency of the audit function. We watch the evidence emerging from the various reviews with interest!
Winding up a DC scheme? Start by reading the Regulator’s guidance
The Pensions Regulator has issued fresh guidance to give trustees of DC occupational pension schemes an overview of the stages to go through on wind-up. As the Regulator states, it does not replace the need for professional guidance, but trustees may find it helpful to read through the guidance first to help them identify what steps they can do themselves, and where they may need additional help from a professional adviser.
The guidance is fairly short and split into four main sections:
- Deciding whether the scheme should be wound up
- Preparing for and entering formal wind-up
- Securing members’ benefits; and
- Completing the wind-up process
The guidance also contains some useful links that will help trustees, for example, to notify the Regulator and HMRC that the scheme has been wound up.
Tan Suee Chieh named next President-elect of the Institute and Faculty of Actuaries
The Institute and Faculty of Actuaries has named Tan Suee Chieh as its next President-elect. Tan Suee Chieh is based in Singapore and will be the first Asian President of the IFoA when he takes on that role, taking over from John Taylor in June 2020.
PPF changes email address
Anyone intending to contact the PPF by email, particularly with any questions regarding the 2019/20 levy season (for which the main data deadline is 31 March 2019), should note that the PPF has changed its email addresses. The term “@ppf.gsi.gov.uk” has been replaced by “@ppf.co.uk” to ensure consistency with the new website.
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.