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Adviser  >  Technical Central  >  Information & guidance  >  Monthly round-up  >  Technical round-up - September 2008

Technical round-up - September 2008

Announcements

FSA and SIPP advice

The FSA has issued a press release on SIPP advice setting out its expectation that firms ensure that they give suitable advice to any customers considering transferring protected rights into Self-Invested Personal Pensions (SIPPS).  

From 1 October this year, people will be able to contract-out of the State Second Pension into a SIPP and transfer existing National Insurance rebates (“protected rights”) from a personal pension into a SIPP.  As with all advised transactions, the FSA expects firms to ensure that any advice around these decisions is suitable and based on an assessment of customer need.

This would include determining whether there is a genuine need for the investment flexibility and control associated with a SIPP, a clear explanation of the costs involved, and how the recommendation meets a customer’s needs and attitude to risk. 

The FSA also confirmed that when advising on contracting-out into a SIPP, firms will also need to provide a comparison of projected retirement income from the SIPP versus potential benefits from the State Second Pension.  This requirement already exists in relation to contracting-out into ordinary personal pensions.

Pension Protection Fund levy scaling factor for 2009/10

The Pension Protection Fund (PPF) has announced a provisional scaling factor that enables eligible UK pension schemes to work out their pension protection levies for 2009/10.

The scaling factor has been set at 2.22.  This figure is subject to consultation but the PPF has said that it does not expect it to change when it is confirmed in November.

Details can be found at PPF Levy 2009/10.

Guidance

Money laundering compliance guidance updated 

HMRC has published revised guidance (MLR9) on who needs to register as a “trust or company service provider” (TCSP). The upshot of this guidance is that occupational pension scheme trustees (both individual trustees and directors and secretaries of trustee companies) are generally excluded from the need to register. This is because one of the exclusions from registration specifically recognises that occupational pension schemes are a low risk area. Therefore, most pension scheme trustees are not caught.

But for those who are caught, HMRC published updated compliance guidance HMRC MLR8 on 11 September 2008. This guidance has been amended to include guidance on compliance for TCSPs (see Appendix 10).

Legislation

The Occupational and Personal Pension Schemes (Transfer Values) (Amendment) Regulations 2008

The Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 came into force on 1 October 2008 amending the Occupational Pension Schemes (Transfer Values) Regulations 1996. From that date, pension scheme trustees rather than the scheme actuary are solely responsible for the calculation of defined contribution (money purchase) and defined benefit (final salary) transfer values.

Under the previous regime, the responsibility for the calculation of cash equivalent transfer values (CETVs) rested largely with the scheme’s actuary, following technical guidance issued by the Board for Actuarial Standards and known as Guidance Note 11 (GN11). GN11 is withdrawn from 1 October 2008 when the revised legislation, containing much of the GN11 detail, came into force.

The Regulations can be found at Transfer Values Amendment Regulations 2008.

The Pensions Regulator (TPR) has now issued guidance on the calculation of CETVs TPR TV Guidance. The guidance should be read in conjunction with the amended 1996 Regulations, although it does not override them.

Rates & Factors

The latest rates are as follow:

Retail Prices Index –  217.2 for August 2008

National Average Earnings Index – 136.3 for July 2008

GAD Interest Rates –  4.5% for October 2008.

Published  8 October 2008

Any research and analysis has been provided by us for our own purposes and the results of it are being made available only incidentally.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice.