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20th May 2013

Greater role for trustees in company takeovers

Following consultation in 2012 the Takeover Panel has now issued a new version of the Takeover Code which takes effect from 20 May 2013.

Essentially, pension scheme trustees now have the same rights as employee representatives in relation to the provision of information about the offer. The new code provides that:
- Trustees will have the opportunity to express their views during a takeover
- Buyers must inform trustees of their intentions for any defined benefit schemes of target companies.

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5th April 2013

DWP formally confirms delays over GMP equalisation

The Pensions Minister, Steve Webb, announced in February that legislation to force GMP equalisation has been shelved until at least Spring 2014. The DWP has now confirmed this in an interim response to the public consultation, published today.

However, the issue rumbles on. Despite pressure from the pensions industry the Government still feels that there is a need to equalise GNP’s in order to comply with EU law. Further, the Government does not feel that sponsoring a test case is the right way forwards. None of this is helpful to trustees and scheme sponsors who must now await the final response and hope that the Government provides simple guidance on the process to covert GMPs to standard scheme benefits.

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1st April 2013

Cartwrights announces acquisition

We are delighted to announce that, with effect from 1st April 2013, we have acquired the trust-based pensions business of Gallagher Benefits Consulting Ltd.

The deal expands the number of staff within the group to 60 and boosts the actuarial team to 16, including 8 qualified actuaries.

Ian Cartwright, who started the group in 1986 said, 'We have had a professional association with the Gallagher business (and its predecessors) for over 20 years and this acquisition complements our services and client portfolio. We are all extremely excited about the opportunities that it brings'.

We offer a full range of services to assist trustees and employers in managing their pension and benefit arrangements, delivering quality services, quickly.

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20th March 2013

New pension news(!) from the Budget

This year's full Budget re-iterated much of the news announced in the Autumn Statement.

However, one point worthy of note was confirmed regarding the new Single Tier State Pension.

It has been confirmed that the introduction of this has been bought forward to April 2016 from April 2017, saving the Treasury some £5.5bn.

Whilst not in itself an issue for occupational pensions schemes, it has a knock-on effect for those that contract–out for future service. The much mooted cessation of this on a defined benefit basis will also happen in 2016, making contracting-out by any form a thing of the past.

Employers and scheme members will have to pay additional national insurance contributions and scheme design issues for dealing with the increased costs will need to be considered.

We have issued a technical Update bulletin on this.
Click on this link to view our Updates.

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15th Febuary 2013

New Auto-Enrolment website launched

A new website has been launched by the NAPF to help employers and HR professionals better understand how to auto-enrol its staff into a workplace pension. The site has been broken down into a number of sections and is designed to help employers understand the technical requirements of automatic enrolment and its issues so that they can be feel more confident about pensions.

Commenting on the new site, Marion Stanley of Cartwrights said ‘this new website is intuitive and easy to use and complements the advice and support that we are providing to our clients. Small to medium sized employers do not generally have the time or resources to build sophisticated AE solutions or licence middleware – any additional support and guidance is welcomed’.
To view the new website, click here

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13th Febuary 2013

GMPs to remain unequal...for now

The government has delayed plans to force schemes to equalise guaranteed minimum pensions until Spring 2014, pensions minister Steve Webb announced today.

Whilst administrators can breathe a sigh of relief (the proposed method of equalisation was complex to say the least), it appears to be only a temporary respite.

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5th December 2012

The best pensions bits from the Chancellor's Autumn Statement

The Chancellor of the Exchequer, George Osborne, delivered his Autumn Statement this afternoon (5 December), which, as expected, included a number of announcements on pensions. The widely predicted reduction in the Annual Allowance happened, albeit delayed until 2014, offering a period of respite for savers.

The key points are:

• The Annual Allowance is to reduce from £50,000 to £40,000 for Pension Input Periods ending on or after 6th April 2014. There is estimated to be around 100,000 people in the UK who save £50,000 or more into pension schemes each year.
But, this reduction to £40,000 will not only hit the high earners. It could have an impact on more modest earners who are in generous final salary schemes with long service. For example, someone earning £55,000 with 20 years service in a final salary scheme giving them 1/60th of final salary for each year of service, would be handed a one-off tax charge if they were to receive an increase on their salary of say £10,000 during the year. They may be able to offset these charges if they have any unused allowance from the previous 3 tax years and so avoiding tax in the short-term.

• The ‘scheme pays’ rules remain the same. This allows individuals who exceed the new Annual Allowance for 2014/15 to request that the scheme pays the AA charge on their behalf. They will have until 31 July 2016 to notify the scheme administrator of their intention. However, notification is required beforehand if they plan to take all of their benefits.

• There will be no change to the carry forward rules; the ability to claim unused annual allowances from each of the previous three tax years continues. The amount which can be carried forward will remain at £50,000 for the three years prior to 2014/15.

• From the 2014/15 tax year the Lifetime Allowance (LTA) for pension savings is to reduce from £1.5m to £1.25m.
A new category of protection called ‘Fixed Protection 2014’ will be offered to anyone who may already have savings in excess of the LTA, but who does not already benefit from one of the earlier forms of protection. This will allow individuals to continue to benefit from the higher LTA, provided that no further pension saving occurs after April 2014.
The Government is set to discuss the possibility of offering a form of ‘personalised protection; which will give individuals an LTA of the greater of their pension rights (up to a maximum of £1.5m) on 5 April 2014 and the standard LTA (£1.25m from April 2014). Unlike Fixed Protection 2014, this will allow for future pension savings. Whether an individual will be able to apply for both fixed (2014) and personalised protection will also form part of the discussions.
The Government is also proposing that for anyone who dies before 6 April 2014, but where lump sum death benefits are not paid until on or after 6 April 2014, that the lump sum will be tested against the LTA at the point of death and not at the point of payment.

• For pensions drawdown, the capped drawdown limit for pensioners of all ages will revert to 120% of the value of an equivalent annuity. Although the Statement did not confirm a date to implement this, 6 April 2013 could be a possible start date. We understand that HMRC will be consulting with providers to find out how soon the change can be implemented and if they would require the amending legislation to be passed before they can adopt the new rules or if they would be happy to work with draft legislation.

HMRC has published an Overview Note which summaries the new legislation. A draft Bill is expected to be published on 11 December 2012, with the Finance Bill 2013 formally enacting the legislation.

Other pension related announcements in the Autumn Statement were:

• During 2013, the DWP will consult on providing the Pensions Regulator with a new statutory objective to consider the long-term affordability of deficit recovery plans for sponsoring employers. This will include considering whether to allow companies who undergo a valuation in 2013 or later to introduce smoothing of the discount rate when calculating the defined benefit pension liabilities and assets. This could allow employers to pay lower contributions.

• The Basic State Pension will increase by 2.5% from April 2013, (an increase of £2.70 per week for those receiving the full pension). This falls in line with the Coalition’s ‘triple lock guarantee’ to pay the highest of the increase in earnings, prices and 2.5%.

• Although National Insurance thresholds and limits are to increase, there will be no increase to the percentage rates of Class 1 and Class 4 National Insurance Contributions.
The HMRC’s Overview Note can be read here.

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9th October 2012

Cartwright Group joins PASA

We are pleased to announce that we have joined PASA (Pensions Administration Standards Association), the independent body which sets and promotes standards for pensions administration.

Tony Thornton, Head of Pensions Administration at Cartwright Group, comments 'we have long been an advocate of complete and accurate data, and strong and robust procedures as a means of providing a fast and efficient administration service. We have consolidated this view by formally joining PASA and supporting them in their goals to achieve good standards across the industry.'

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12th June 2012

The Pensions Regulator provides an update on its scheme record keeping and data survey

The Pensions Regulator has published its third survey on the progress of trustees in ensuring that the data quality of their schemes is in line with the requirements first set out in 2010.

The survey indicates that, whilst progress is being made towards a goal of 95% for legacy data and 100% for new data by the end of 2012, there is still a sizeable minority of arrangements that do not yet have plans in place to measure data quality and monitor improvements. This is particularly true of smaller schemes.

According to Tony Thornton, Head of Pensions Administration at Cartwright Group, this is not surprising. He says “The smaller DB schemes are invariably legacy arrangements set up many years ago, which have been closed to new joiners and/or future accrual for some time. As such they only affect a small minority of the sponsor’s employees and are not a major focal point of day to day business activity.”

Tony added “Unfortunately, ignoring the problem will not make it go away and delaying any plan to identify gaps in the data and correct them is likely to be a false economy. The end game for most small DB arrangements is to secure the individuals’ correct entitlements with an insurance policy. This rids the sponsor of the expense of providing the scheme and complying with the complex rules and regulations for an ever diminishing number of individuals. But, if the data is not complete and accurate, the cost of securing such benefits is likely to be higher than it need be as insurers will add a premium to reflect the risk of the unknown. We urge all trustee boards, large and small, to not only plan for and implement a data quality review, but also to monitor its progress on at least an annual basis.”

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27th April 2012

The Regulator reinforces scheme funding requirements

As suggested by Bill Galvin in February, the Pensions Regulator has today published a guidance statement relating to the funding of defined benefit pension schemes with actuarial valuation dates falling between September 2011 and September 2012. Seen by most commentators as an easement to the current funding regulations and guidance, the statement has been released in recognition of the exceptionally difficult economic and trading conditions.

The Regulator is aware that the current exceptionally low gilt yields, to a large extent driven by the Bank Of England's quantitative easing programme, can result in a huge increase in the liabilities for a scheme undergoing a current funding review, and that the volatile markets impact the asset valuation that is used and combining together to significantly increase scheme deficits. A typical scheme being valued as at December 2011, when gilt yields hit record lows, is likely be in a worse asset position than a scheme being valued in March 2012.

In essence, the Regulator has reinforced the existing Regulations and states that there is sufficient flexibility within these to deal with the current economic situation. Certain trustees and sponsors remain able to agree to longer scheme recovery periods and to potentially structure deficit contributions differently, such as making greater use of contingent assets. In order to adopt a longer recovery period, the trustees need to satisfy the Regulator that there are genuine financial and trading reasons for the extended period and that the employer is not prioritising other payments, such as dividends to shareholders, over pension contributions.

The Regulator said, 'employers that are struggling have greater breathing space to fill deficits over a longer period. However, we will draw a distinction between this group and those cases where schemes are substantially underfunded and employers are able to afford higher contributions. In such cases we will expect pension trustees to be taking steps to put their scheme on a more stable footing.'

The Regulator has its hands tied somewhat in terms of amending the underlying basis for scheme valuations. As such, we welcome the approach that it is adopting and its recognition of the difficulties that the economic conditions are placing on trustees and sponsors of DB plans. Quantitative easing has done little to stimulate the economy, but has had disastrous effects on gilt yields and the costs of pension provision. This has been further worsened by the continued investment in the UK as a perceived 'safe haven' for investors.

Martin Ralph, Consultancy Director at Cartwrights, comments, 'whilst we remain of the opinion that gilt yields will eventually revert to more normal levels, the timeline and extent of this is impossible to predict. Schemes that undergo valuations in the current conditions have technical provisions that are atypically high, but which their trustees and sponsors must seek to manage within the current tough Regulatory framework.'
A copy of the full Statement, running to 33 points, can be downloaded by clicking here.

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