News

Status of The Money Purchase Scheme Update - The Bridge case

You are already aware that the status of the Scheme as a money purchase scheme was in doubt. The doubt arose initially from a case involving KPMG’s pension scheme which concerned questions as to its status.

The Bridge appeal (the case of Bridge v Yates), was reported in March 2010. The outcome was potentially helpful in clarifying the nature of the majority of benefits under the With Profits Section as money purchase benefits. However, at that time, the Department for Work and Pensions (DWP) were granted leave to appeal to the Supreme Court, this was finally heard in June 2011.

Judgment was handed down on 27 July and dismissed the appeal. This supports our analysis of the With Profits Section as providing largely money purchase benefits. The DWP has issued a statement suggesting they will be introducing legislation with retrospective effect in light of this. We will keep members and employers up to date on this issue via the website.

The Trustee Board continues to work hard to obtain clarification on this issue. Please click on the following link to view the full judgment The Bridge Appeal - 27 July 2011.

(updated 29th July 2011)

Election of Member Nominated Directors at Cheviot Trustees Limited

The Cheviot Trust is managed by Cheviot Trustees Limited.

The Trust documentation provides for the Trustee Board of Cheviot Trustees Limited to have fifteen directors, six of whom are member nominated, six are employer nominated and up to three Co-opted directors, appointed by the other Board members by reason of their expertise. Member Nominated Directors are appointed for a three year term, at which point they usually have to stand for re-election if they wish to continue.

The Board of the Trustee currently comprises:

The term of two Member Nominated Directors expired this year. Both put themselves forward for re-election and, in the absence of any other candidates, were reappointed.

(updated 1st September 2011)

Money Purchase Scheme Benefit Statements 2010

The benefit statements as at 31 December 2010 were issued in April 2011. These are also available to review or download from your Online Account. If you have not yet set up your Online Account, please complete and return the comments form enclosed with your benefit statement pack. Your account will be created and you will be issued with log-in details within 5 working days from receipt of your form.

Please see the Member Information page for an example benefit statement. You will also find a useful guide to help you understand your statement.

(updated 1st September 2011)

Administration Changes to the Unit Linked Options

We have changed the way we manage and invest the Unit Linked Options. Please see our new investment factsheets.

Restriction of pensions tax relief

Further to the previous News update below, as HMRC have received a number of queries and comments on the legislation and guidance, HMRC thought it would be helpful to provide further clarification on some of the issues raised. Please click here to review the guidance http://www.hmrc.gov.uk/pensionschemes/rest-pens-tr.htm

(updated 28 February 2011)

Treasury announces changes to pensions tax relief - annual and lifetime allowances reduced

On 14 October 2010, Financial Secretary to the Treasury, announced that the annual allowance (AA) for pension saving will be cut from £255,000 to £50,000 from April 2011, and the lifetime allowance (LTA) will be reduced from £1.8 million to £1.5 million from 2012.

In a detailed response to its July 2010 discussion document, the Treasury confirms it is scrapping the previous Government’s plans to restrict pensions tax relief for high-income individuals in favour of the alternative approach of reducing the AA and LTA.

Draft legislation will be published later in the Autumn detailing how these measures will be implemented. Further points include:

• ill-health pensions will be excluded from the new regime altogether;
• a flat-rate factor of 16 will be used to value defined benefit accruals;
• scheme members will be able to carry forward unused annual allowance in the previous 3 years to avoid or reduce charges arising from one-off spikes in benefit accrual; and
• from April 2012, the 1% link with the LTA for the valuation limit for trivial commutation will be broken and the limit will instead be frozen at its current level of £18,000.

Retirement Ages

On 20 October 2010, the Government announcements that the State Pension Age (SPA) will reach 66 by 2020, bringing forward by six years the planned date for this increase under the previous Government. This follows the DWP’s publication of its response to consultation on the timing of the increase. There will be a new acceleration rate in the SPA from April 2016 for women (as this is currently rising from age 60 to 65 to equalise with men’s SPA by November 2018), which will increase at the rate of three months every four months. Between December 2018 and April 2020, the SPA will rise from 65 to 66 for both men and women. This will be phased in at a rate of three months’ increase in SPA every 4 months.

The Pensions Regulator (TPR) publishes retirement choices leaflet

On 2 November, TPR published an updated leaflet on retirement choices which aims at helping members of defined contribution schemes make better decisions about their retirement income and thus aiming to improve the uptake of the open market option (OMO) where members use their fund to buy an annuity from a different provider at retirement. Trustees and providers can facilitate better decision making (TPR says) by motivating members to take action and by providing simple, readable information that helps members to maximise their retirement income.

View TPR’s leaflet "Making your retirement choices: think before you choose".

Cheviot comment – all our Money Purchase Scheme members are required to take an open market option on retirement and are provided with access to an Independent Financial Adviser (Price Bailey). Price Bailey can also advise on alternatives to an annuity to suit the member’s circumstances.

(updated 19 November 2010)