The Government have published some reasonably useful literature on the end of contracting-out which you could pinch as a starting point. I know, for example, that the NAPF fed into the drafting. If useful, I'll see what I can find for you.
I put the following in the last newsletter to members:
At present active members of the Scheme are ‘contracted-out’ of the State Second Pension (S2P). This means that members and employers pay a lower rate of National Insurance contributions while employees are active members of the Scheme, but members do not build up an entitlement to benefits under S2P for the period that they are contracted-out, in return the Scheme provides a minimum level of benefit (known as the “Guaranteed Minimum Pension”). Overall, the benefits provided by the Scheme exceed the minimum requirements for contracting-out.
Recent legislation means that from 6 April 2016 the facility to contract-out of S2P will no longer be available as a result of the Government’s move to a single tier State Pension. The changes will only apply to those people who are under the State Pension Age in April 2016.
One result of the Scheme no longer being contracted-out of the State pension scheme from April 2016 is that most active members will see a drop in their take-home salary as they begin to pay higher National Insurance contributions. The end of contracting-out in April 2016 will also mean that a ‘rebate’ paid by the Government to contracted-out pension schemes such as the UNISON Staff Pension Scheme will end.
From 6 April 2016 all active members of the Scheme will build up full benefits in the new single tiered State Pension scheme.
For further information on State Pensions, please visit www.gov.uk/browse/working/state-pension .
I’m not aware of any advisor benchmarks (apart from which firms win the most awards), nor can I help you remove any bias. I can however advise that in my experience the real value of conducting advisor reviews is that (after all the ‘evidence’ has been collected) it enables a focussed ‘service’ rather than ‘scheme’ discussion to be conducted with the advisor. These reviews/discussions often highlight areas where the performance expectation of the Trustee is not met by the advisor. This can be rather an iterative process over a number of years but it should lead to a clear set of performance measures or KPIs for the advisor (which probably should have been set at the outset!). Given the wide range of services that an investment advisor can carry out I would imagine that external benchmarks would be very difficult to establish.
A few years ago when I worked for a £6bn scheme we had our entire Investment Service (in-house staff/Investment Committee and Advisors) independently assessed/benchmarked by Paul Boerboom at Avida International. The whole exercise was very worthwhile and led to a number of fundamental changes.
Cash supplement - effectively dependent on grade.
We do not compensate employees who opt out for tax reasons.
We've had a number of people of varying levels of seniority opt out of both DB and DC because of the LTA. They are all treated the same (as they are for pensions). We pay our highest core DC rate of contribution (we have age-bands) less the employer NI cost, which equates to a cash in lieu payment of 7% of our pensionable salary cap (even if they were pre-89 and not capped). Some are unhappy as they lose an additional 4% matched contribution, but as it's 7% or nothing, they have taken it.
We pay a cash allowance equivalent in value to the DC contribution i.e. adjusted to take account of Company NICs.
May I ask a question of people who will be offering a cash allowance in lieu of DB accrual:
How do you decide which employees will be offered the option? Is it promoted to everybody, or do you use discretion to invite chosen individuals, or do you offer it to everyone who asks? Do you offer only above a certain salary level or job grade? Do you allow cash only if employees demonstrate that they have taken regulated advice? I won't quote you by name, but any comments would be really valuable.
At present we only offer cash to those who are "close" to the Standard Life Time Allowance - by which we mean about 90% of the way there on an Individual Protection like assessment. This doesn't really work for Annual Allowance problems though so I am planning to extend the scope somehow - probably salary related at about 120k.
I suppose it's no different to participating in an industry-wide scheme (eg. LGPS or Pensions Trust), but I'm not convinced it can ultimately be for the best for anyone (except Hedgehog of course)
It's an interesting view from the Company too, since the relationship dynamic between Trustee and Company would, under that model, be completely stretched and altered. In effect, the Company would be giving up much more control.
It depends on your size I suppose, but I'd be tempted to look at models where various elements are outsourced - perhaps just the admin.
I've never heard of them!
I imagine that they could be a bit prickly to deal with...
Never heard of them.
They have apparently only been "live" since September.
A cap on the tax free cash lump sum, introduced with unbelievably complicated transitional and anti-forestalling arrangements
A clamp down on the use of salary sacrifice, introduced with unbelievably complicated transitional and anti-forestalling arrangements
New guidance from HMRC with 'help' on reclaiming VAT, introduced with unbelievably complicated transitional and anti-forestalling arrangements
AND MY BANKER:
A 'pensions scandal' headline in the tabloids
So, basically 'complification' and a scandal!
I think 'response 1' has summed it up well. More complications, regulations from various bodies that contradict each other and bound to be a few pension scandal headlines.
It's one of those peripheral assumptions that doesn't seem to have much impact. I suppose if you were looking at a buy-in or buy-out at some stage then it might be worth doing. If you've got thousands of pensioners I wouldn't bother, but if 100 or so then it might be worth it. Depending on your rules for spouse's pensions, there is, of course, nothing to stop them remarrying. You might find that the 10 largest pensioners are all married to a much younger spouse! I tend to take the view that consultants will float ideas and see which generate interest - it might be one of those. Perhaps they did a post code mortality study last time?
From memory we used a single person's tax code for the children, but paid to Mother's bank account so in most cases the children's pensions were paid without any tax being deducted. With no Mother you can pay to the 20 year old direct and declare to HMRC in normal way and obtain a tax code - likely she will have limited other income but HMRC will give you the code after checking the position. The 13 year old should have a guardian or someone who looks after him and he will have his own tax allowance but payment can be paid to guardian or a trustee until he reaches age 18 - then paid to him if he goes into further education. Do your rules state anything about
doubling the children's pensions if no spouse pension payable - that is quite common.
Children have their own payroll record.
We set up a separate payroll record for each child, but pay to the surviving parent/guardian until they reach age 18. Children are entitled to a single person's tax code and, through RTI, HMRC should be able to monitor if they have other income.
We were advised by HMRC to tax the child's allowance at BR until personal code was advised.
We do for pensioners but not for deferreds.
Yes - In all cases.
Changes will be accepted from an e-mail address where the member has previously registered this with us or where the instruction received by the TPA has been sent from the company e-mail system.
Since its establishment in 2002, Pensionweb has helped hundreds of in-house pension professionals achieve better outcomes for their employers’ pension arrangements.
To find out how – call Julie (01924 203906) for a FREE trial.