Government in improving disclosure. We also want to test the case for capping default fund charges and have offered a range of structures to help tease out some of the various issues.”
The consultation is aimed at protecting employees from poor pension returns due to pension charges and seeks views on whether:
further action is required to improve transparency and disclosure of pension charges a cap on charges in default funds of defined contribution qualifying schemes should be introduced differential charging between active and deferred members, consultancy charges and commissions should be banned in defined contribution qualifying schemes.
The policy team will be reviewing this consultation and will publish a survey shortly if deemed necessary.
DWP launches money purchase consultation following Bridge Trustees ruling
4 November 2013
The Department for Work and Pensions (DWP) has launched a consultation into the statutory definition of money purchase benefits.
Professional Pensions reports:
The consultation on the Pensions Act 2011 (Transitional and Consequential Provisions) Regulations 2014 seeks to clarify the money purchase definition include in section 29 of the Pensions Act 2011, and provide support for schemes affected by the changes. The DWP said the legislation and its related transitional arrangements will affect "cash balance benefits treated as money purchase benefits" and "pensions derived from money purchase benefits or cash balance benefits that have been treated as money purchase benefits". It is estimated 40,000 private sector occupational pension schemes contain money purchase sections. Of these, approximately 2% are hybrid schemes, containing a mixture of money purchase and defined benefit (DB) arrangements. The DWP said it is not aware of any schemes which will "move entirely from money purchase to non-money purchase" under the regulations. However, it said information it holds is self- reported by schemes. In July 2011, the final judgment in the long running Bridge v Yates case ruled that benefits with a guaranteed interest rate, and money purchase benefits which had been converted into a pension scheme, were included in the definition of money purchase benefits. This raised the possibility of money purchase arrangements leading to a deficit in the scheme. Section 29 of the Pensions Act 2011 clarified that a benefit is money purchase when it is calculated "solely by reference to the assets". The amendments will retrospectively apply from 1 January 1997. However, transitional and supplementary provisions that are "deregulatory in nature" are included in the consultation. These arrangements will remove the need to review decisions made from 1997 to 28 July 2011. Schemes providing a guarantee in the accumulation phase, such as link to salary or guaranteed interest rate, or a pension in payment from money purchase or cash balance benefits without a matching insurance policy, will be affected. At the time, experts warned of "dangerous side-effects" of the legislation.
CIPP Policy News Journal
16/04/2014, Page 438 of 519
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