As usual, April will see the introduction of various changes and deadlines affecting employers, trustees and members of workplace pension schemes. This update summarises the most important of these taking effect in and around April 2017.
- Money purchase annual allowance for those who flexibly access their pension savings. At last year’s Autumn Statement, the Government announced its proposal to reduce the money purchase annual allowance from £10,000 to £4,000 from April 2017. The proposal is subject to consultation (which recently concluded) and would require changes to legislation (to be included in the Finance Bill 2017)
- Individual protection 2014. The deadline for claiming individual protection (IP) 2014 against a lifetime allowance (LTA) charge is 5 April 2017. The standard LTA reduced from £1.5 million to £1.25 million in April 2014. IP 2014 allows members who are adversely affected by the reduction to claim a personalised LTA based on the value of their pension savings on 5 April 2014, up to a maximum of £1.5 million.
- Power to apply fixed rate GMP revaluation when pensionable service ends. Trustees of schemes that were contracted out until the abolition of contracting out on 6 April 2016 have until 5 April 2017 to pass a resolution to amend their scheme rules to provide for fixed rate GMP revaluation to apply on termination of pensionable service (rather than on termination of contracted-out service). This is important for employers with scheme rules which apply fixed rate GMP revaluation from the end of contracted-out service. Failure to pass a resolution for such schemes may leave the trustees having to pay the higher of two amounts of GMP revaluation and increase the liabilities of the scheme.
- Reduction in rate of fixed rate GMP revaluation. The Government proposes to reduce the rate of fixed rate GMP revaluation from 4.75% to 4% for early leavers from 6 April 2017. We are still awaiting the draft legislation that will implement this change.
PPF levy 2017/18 certification
- Scheme data and contingent assets/asset-backed contributions/mortgages to be taken into account for the purposes of calculating an employer’s 2017/18 PPF levy must be submitted/certified/ re-certified by midnight on 31 March 2017. Deficit-reduction contributions must be certified by 5pm on 28 April 2017.
Automatic enrolment: new earnings limits and easements
- New earnings limits. From 6 April 2017, the lower and upper earnings limits of the qualifying earnings band for automatic enrolment purposes will increase in line with the lower and upper earnings limits for NICs (from £5,824 to £5,876 and from £43,000 to £45,000 respectively). Some money purchase schemes use this band of earnings as the measure for contributions into the scheme, while the lower threshold is used to distinguish between non-eligible jobholders and entitled workers for all employers. Employers should continue to use existing figures up to and including 5 April 2017 but will need to ensure that payroll and HR systems are revised to factor in the new figures from 6 April 2017
- Static earnings trigger. The earnings trigger (the level of earnings which a worker must receive to be auto enrolled) remains at £10,000
- Further easements to the automatic enrolment duty. Regulations just laid before Parliament will implement new exceptions to the employer duty to automatically enrol jobholders. From 6 March 2017, where an employer has reasonable grounds to believe a jobholder has claimed fixed protection 2016 or individual protection 2016, the employer's duty to auto-enrol (or re-enrol) the jobholder is converted into a discretion to do so.
Early exit charges under personal pension schemes
- The majority of early exit charges payable by members of contract-based personal pension schemes who wish to leave their scheme early in order to access their pension flexibly will be capped from 31 March 2017. The cap will be 1% of the value of the benefits being taken from existing contracts entered into before 31 March 2017 and 0% for new personal pension contracts.