2017 is going to be another tremendously busy year for everyone working with pensions. While we can expect a great deal of changes and updates to law, cases and policy, we've highlighted a few main changes for you to keep on your radar.
The government has confirmed the state pension will rise by 2.5% in April 2017
In real terms, this will mean weekly pension payments will increase from £155.65 to £159.55 and the old state pension will rise from £119.30 to £122.30. This increase is the result of the promise George Osborne made in 2010 that pensions will rise by the greater of inflation, earnings growth and 2.5%. However, pensioners are warned to enjoy these increases while they can as hints from Phillip Hammond in the last Autumn Statement were that these increases will not continue after 2020.
The DWP’s consultation on GMP equalisation closed on 15 January 2017
The government has wanted to encourage schemes to equalise pension scheme benefits to remove the sex inequalities in the statutory GMP framework. Now the consultation responses will be looked at and proposals finalised which may take a considerable amount of time. However, we know GMP equalisation will continue to be an issue for trustees and administrators in 2017 once the DWP announces exactly what needs to be done.
The DWP and Treasury’s consultation on pension scams will close on 13 February 2017
It will be interesting to see what new measures are introduced; suggestions have included a ban on cold calling or making it harder to start pension schemes in the first place. Although it is not yet clear which measures will be put in place, the government has been keen to say they are aware of the extent and increasing occurrence of pension scams, and although it will be a “challenging proposition” to tackle, they are committed to doing so.
The government has confirmed the DB Green Paper will be launched this Spring...
...although the exact timing is still unclear. The main issues expected to be addressed are indexation, consolidation, valuation and member protection, although no detail is known.
The PPF’s final version of the new levy rules will be published on 31 March 2017
The PPF published their provisional levy rules in December 2016. While the PPF have said it is their “firm intention” that there will not be many changes to these provisional rules (and parties should feel comfortable in making plans based on them), some additions will be made in relation to eligible schemes that have been through a restructuring and are left without a substantive employer that will be looked at with interest.
The much anticipated Lifetime ISA will launch in April 2017
The Lifetime ISA, often referred to as the LISA, is a new saving mechanism which allows an individual over age 18 and under age 40 to save up to £4,000 a year which will be topped up by 25% by the government. The saved funds can then be withdrawn for certain set uses, such as to buy a first home or on retirement after the age of 60. There is a great deal of talk in the market about this which will no doubt continue to grow in the next few months. For more details about LISAs please see our December 2016 LISA update which can be found here.
This year, Auto-enrolment will celebrate its 5th birthday and so the DWP will review the auto-enrolment regime
In an attempt to further encourage the nation to save, the DWP will look at whether auto-enrolment is working in the best possible way by reviewing the existing system including the rules for auto-enrolment, the earnings trigger and age criteria. A report due towards the end of 2017 documenting findings and recommending policy changes. Some changes are needed with 1 in 7 micro-employers missing their staging date and the very lowest earners not really benefitting from the policy. With this anniversary, the biggest employers who were subject to the first auto-enrolment staging dates will now be approaching the time when they have to re-enrol.
New master trusts legislation contained in the Pension Schemes Bill 2016/17 is to become law
This legislation will mean tougher regulation on master trusts and increased powers for The Pensions Regulator. We previously gave our thoughts about the new master trusts requirements in December 2016 which can be found here.
We are also expecting decisions on the following notable cases in 2017:
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Barnardo's and others v Buckinghamshire and others - in 2016, the Court of Appeal would not allow the trustees of the scheme to switch index linked payments from RPI to CPI. The Supreme Court agreed to the appeal which is expected to be heard in 2017.
- O'Brien v Ministry of Justice; Walker v Innospec and others – whether O’Brien should be allowed to claim pension rights for his civil partner under his pension scheme retrospectively as a result of changes in EU law combatting sexual orientation discrimination.
- Bradbury v British Broadcasting Corporation – to be heard at the Court of Appeal at the end of February on whether the BBC’s introduction of a 1 per cent cap to increases on pensionable salary was a breach of his employer’s implied duty and trust.
- Safeway Ltd v Newton and another - at the beginning of 2016, the High Court refused to grant a declaration to Safeway Ltd confirming that normal pension age had been equalised at 65 with effect from December 1991. The appeal is listed to be heard by the Court of Appeal on 4 July 2017.
- ITV Plc and Ors (Box Clever) v The Pensions Regulator – the final appeal of this four year legal battle will finally be heard in the Upper Tribunal in Autumn 2017. The case calls into question the extent and flexibility of The Pensions Regulators powers and the appeal will determine whether The Pensions Regulator can implement a financial support direction to ITV which was originally issued in December 2011.
- IBM - the employer's duty of good faith, or Imperial duty, is due to be heard by the Court of Appeal in May 2017.