July has, amongst other things, seen a call for action on GMP equalisation and both the Financial Conduct Authority (FCA) and The Pensions Administration Standards Association (PASA) separately addressing concerns around pension transfers. Martin Fife of Barnett Waddingham reviews some of the issues impacting pension administration.
HMRC Pension Schemes Newsletter 112
HMRC has published Pension Schemes Newsletter 112 covering the usual range of topics. This edition includes:
• Annual allowance pension savings statements for the 2018/19 tax year must have been issued by 6 October 2019.
• A reminder that members exceeding the annual allowance and who do not have sufficient unused annual allowance to carry forward to cover the excess must declare this on their Self-Assessment tax return.
Call to action on GMP equalisation
The GMP Equalisation Working Group (GMPEWG), launched in January 2019, has urged a call to action on GMP equalisation. The GMPEWG’s document identifies three initial areas for schemes to start working on now:
• Understanding and progressing GMP rectification.
• Reviewing the quality and availability of the data needed for GMP equalisation.
• Managing impacted transactions, such as transfer, trivial commutation and serious ill-health lump sum payments.
This will be followed up with a guidance paper later in the year on the relationship between GMP rectification and equalisation. The first version of full guidance documents for data, impacted transactions, methodology and tax.
The FCA, has published Consultation Paper CP19/25 – Pension Transfer Advice: Contingent Charging and Other Proposed Changes. The proposed changes to the FCA Handbook address the FCA’s concern that too many advisers are delivering poor advice due, in particular, to the practice of contingent charging, where advisers only get paid if the transfer goes ahead.
The overall intention is to reduce the number of individuals transferring, when it is not in their best interests. It is therefore proposing a package of measures, including a ban on contingent charging for defined benefit transfers and conversions, except in certain limited circumstances, and other changes.
PASA transfer guidance
The Pensions Administration Standards Association (PASA) has published its Defined Benefit Transfers: A Guide to Good Practice.
This is Part 1 of a series, which deals with more straightforward transfer cases. Part 2 is planned to follow towards the end of 2019 covering ‘non-standard’ or complex transfers.
The aim of the guidance is to:
• Improve the overall member experience through faster, safer transfers.
• Improve efficiency for administrators.
• Improve communications and transparency in the processing of transfers.
A key element of the guidance is the Transfer Template, which was designed by a group of industry representatives under the supervision of the FCA and TPR. This is to help improve the level of information provided by pension schemes to financial advisers and the quality of advice given by advisers on pension transfer cases.
It is noted that while the guidance is voluntary, PASA anticipates that the Pensions Ombudsman will reference it, as a source of good industry practice, when reviewing complaint cases.
Pension Administration Team Leader – Barnett Waddingham