The high court has overturned the approach taken by the Pensions Ombudsman. Trustees now need to review how they handle transfer requests, and revisit past transfer requests they have turned down.
With thanks to law firm Pinsent Masons for the following summary of the case.
There has been a recent change to members' transfer rights. The high court has overturned the approach taken by the Pensions Ombudsman. Trustees now need to review how they handle transfer requests, and revisit past transfer requests they have turned down. The Ombudsman has around 200 live cases to consider. The background Trustees have been doing their best to combat pension scams. On receipt of a transfer request, they have been undertaking due diligence in line with the industry code of practice and acting appropriately when warning signs emerge. In many cases, they have refused to process the transfer. Last year, the Ombudsman identified a legal basis for declining a transfer. He ruled that a member had a statutory right to transfer to an occupational pension scheme only if he or she was receiving remuneration from an employer participating in that scheme. This posed an additional hurdle for the pension scammers: it required them to establish some form of employment relationship between the member and a scheme employer. What has happened now? The high court (in a case in which we acted for the pension provider) disagreed with the Ombudsman. It decided that the statutory right to transfer to an occupational pension scheme does still require the member to be receiving remuneration, but the source of that remuneration is irrelevant. This removes an obstacle in the path of pension scammers: they no longer need to create and document an employment relationship with a scheme employer. What does this mean for trustees? If you are a trustee, you should now review the processes you have put in place for dealing with transfer requests. You may have refused a transfer on the basis that the member was not receiving remuneration from a participating employer. You will now need to revisit that refusal. The Ombudsman has acknowledged that the court decision may prevent trustees from processing a transfer "even if they have significant concerns that it may be for the purposes of pension liberation".
This ruling only affects members' statutory rights to a transfer. Some scheme rules may give trustees discretion (or even force them) to make a transfer where the member has no statutory right.
Chancellor drops plans to end or alter tax relief on pensions 7 March 2016
After much speculation about what would be announced in next week’s Budget, George Osborne has decided not to go ahead with any changes to tax relief on pensions.
In July 2015 the Government published Strengthening the incentive to save: a consultation on pensions tax relief to find out if there was a case for reforming pensions tax relief to strengthen incentives to save and offer savers greater simplicity and transparency, or whether it would be best to keep with the current system. The CIPP Policy Team issued two surveys to the payroll profession, one in conjunction with HM Treasury. In response although there was broad agreement that the current system of tax relief on pensions is complex and not widely understood, there were a wide range of opinions on how pensions tax relief could be simplified. There was a common theme throughout which was that regardless of the chosen taxation method for pensions, having a simple system communicated clearly would have the biggest impact on pension saving. CIPP comment Payroll Professionals are used to dealing with change but the administrative burden that any option for change would present is daunting; any alternative is a complex process for payroll and pensions experts alike. We lobbied for a minimum of two years implementation time if changes were to be brought in as it is of vital importance to software developers to have enough time to introduce the comprehensive and fully tested functionality upon which payroll departments rely. It is those administering the payroll that have to ensure that individuals continue to be paid accurately and on time.
The CIPP welcomes the decision and are very pleased that the Government has listened to the concerns of payroll and pensions professionals and decided not to pursue any changes at this time.
In a BBC news report there were varying views:
Labour's shadow chancellor John McDonnell said Mr Osborne was "yet again ducking a big decision" . Campaigners said he had missed a "huge opportunity" to tackle pension inequality and help the lower paid.
CIPP Policy News Journal
25/04/2016, Page 384 of 453
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