Pensions Trustee Update | Summer 2016: News in brief

This update rounds up the news in brief, including pensions provisions in the Queen’s Speech, government consultations on the tax framework for the secondary annuity market and on the British Steel Pension Scheme, and a look at recent public sector pensions developments.

Queen’s speech: new Pensions Bill

The Queen’s speech on 18 May 2016 heralded a new Pensions Bill. The areas that this will cover are set out in the table below. It also confirmed the introduction of the Lifetime ISA, which will be in a separate Lifetime Savings Bill.

New Pensions Bill to further reform Britain’s private pensions system

Secondary annuity market: the government consults on the tax framework

The government has issued a more  on the detail of the tax framework for the proposed secondary market, which will allow people to sell their annuities in certain circumstances. See our update for further details. We expect further regulation in the next few months designed to enable the new market. It is anticipated that the secondary market for annuities will become operational in April 2017.

British Steel consultation

The parent company of Tata Steel UK (TSUK), the principal employer of the British Steel Pension Scheme (BSPS), plans to restructure its UK steel business. The DWP has issued a consultation considering various options for helping the BSPS as part of a wider package of government support for UK steel, steel workers and affected localities. If TSUK is sold, it is unlikely a purchaser would agree to take on the pension scheme as part of the deal. The consultation therefore looks at solutions to achieve a separation of the BSPS from TSUK, subject to its funding position being strong enough to exist outside the PPF and finding a new employer willing to sponsor the scheme, whilst also achieving the best outcome for BSPS members. The consultation considers four possible options:

• use existing regulatory mechanisms – a Regulated Apportionment Arrangement, which could involve the scheme entering the PPF;
• crystallise the employer debt – an option that Tata has indicated it will not accept because the debt would be unaffordable;
• reduce indexation and revaluation of accrued pension rights – this controversial option would involve retrospective changes to members’ benefits which would require legislation specific to the BSPS to allow this. Many consider this would set an uncomfortable precedent;
• a bulk transfer of liabilities to a new scheme in which the members would receive lower levels of indexation and revaluation than those in BSPS, but better benefits than those provided by the PPF. This would require amendments to legislation to allow the transfer to go ahead without individual member consents, despite the reductions to benefits. The proposal is that these amendments would only apply to other schemes that were in circumstances similar to those faced by the BSPS, for example they would be limited to very large schemes with over 100,000 members. 

The consultation closed on 23 June 2016 and the government’s response is awaited.

Public sector developments

Please see our public sector pensions team’s round-up of recent developments. This reports on:

• public sector ‘golden goodbyes’: an update on various government initiatives on capping or reducing public sector exit payments;
• fair Deal for the Local Government Pension Scheme (LGPS): a consultation on the government’s proposal to extend existing guidance on protecting staff pension rights in the context of a transfer of staff from the public sector to include local authority employees;
• asset pooling: plans to transform the 89 LGPS funds in England and Wales by pooling their investments together into six British Wealth Funds; and
• Investment Regulations: a consultation on new draft LGPS Investment Regulations ended on 19 February 2016; a response is awaited.