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Self Investment - Section 40, Pensions Act 1995
The restrictions on a pension scheme investing in a participating employer, or a connected employer, through the means of a "collective investment scheme" (e.g. a unit trust) have been made more stringent by the Occupational Pension Schemes Investment (Amendment) Regulations 2010. The 5% limit now applies to investment in a collective investment scheme in the same way as it applies to e.g. direct investment in an employer's stock. This is bound to make investment and administrative procedures more onerous in certain cases.
The Pensions Regulator released a statement on 10 November regarding its expectations of trustees, employers and advisers involved in making pension scheme investment decisions - click here to access the statement.
Lehman Brothers - Financial Support Direction
On 13 September 2010 the Determinations Panel of the Pensions Regulator determined that a Financial Support Direction would be issued in respect of Lehman Brothers Pension Scheme (the principal employer of which was Lehman Brothers Limited ("LBL"), the only participating employer) against certain other Lehman Brothers companies, including Lehman Brothers Holdings Incorporated ("LBHI"), the U.S. ultimate parent company. The reasons for the issuing of the order against LBHI were that LBHI was the guarantor of LBL's liabilities and that the value of the benefits received by LBHI from LBL was considerable: "everything that the subsidiaries benefited from ultimately benefited LBHI". It was held to be reasonable to issue FSDs against the principal operating companies (Lehman Brothers International (Europe), Lehman Brothers Europe Limited and Lehman Brothers Asset Management (Europe) Ltd) because LBL provided services to those companies in the form of secondment of staff and "back-room services", and charged to the operating companies its costs for doing so.
The DWP has announced proposed changes to the timetable currently set for changing state pensionable ages. These will affect people born between 6 April 1953 and 5 April 1960. If adopted by Parliament, the changes will mean that for this group State pension age will increase so that by April 2020 there will be a State pension age of 66 for both sexes.
Section 251 Pensions Act 2004
The DWP has stated that the period under section 251 of the Pensions Act 2004 will be extended for a further five years. Section 251 applies to refunds of surplus to employers from occupational pension schemes. Section 251 requires trustees of schemes which already had the power to repay surplus as at 6 April 2006, and wish to preserve that power, to pass a confirming trustee resolution, giving the members three months' prior notice, before 6 April 2011. If this action is not taken, the power may no longer be used after 6 April 2011. It appears that the relevant period will now be extended to 2016, although the draft legislation has not yet been published. The DWP have confirmed that section 251 would not apply to payments to employers which, for example, reimbursed the employer for scheme expenses that the employer had paid, or to refunds on contributions on winding-up.
Reduction of Tax Reliefs
HM Treasury announced on 14 October that:
- the annual allowance for tax privileged pension saving will be reduced from £255,000 to £50,000. This is to some extent mitigated by permitting the unused allowance for the three previous tax years to be carried forward. (The annual allowance is a limit on the annual increase in pensions savings. If the increase is exceeded, a tax charge will arise).
- the lifetime allowance will be reduced from £1.8 million to £1.5 million.
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This briefing is written as a general guide only. It is not intended to contain definitive legal advice which should be sought as appropriate in relation to any particular matter.