Changes to scheme returns


The Pensions Regulator has recently added to the questions that trustees will be required to answer as part of their annual scheme return. There are now additional sections for hybrid schemes (those that have both defined benefit (DB) and defined contribution elements), for schemes with asset-backed funding arrangements, and those that operate incentive exercises. The additions to the scheme return are intended to give the Regulator greater insight into the risks faced by DB schemes. However, given the somewhat brief and high-level nature of


the questions it might be that such additions may not give the Regulator the full picture, so it may be that more information will be sought in future. Whilst the additions are not too onerous, they will possibly extend the time taken to complete the return. Given that the ‘thirty working days’ deadline has not been commensurately extended, trustees (or to whomever they have delegated the responsibility) should start their returns as early as possible to ensure completion within the required timescales.


FCA applies Listing Rules changes early The Financial Conduct Authority (FCA) has brought forward the effective date of changes to the Listing Rules, so that premium listed UK companies will only have to comply with one set of directors’ pension disclosure requirements in annual financial reports for years ending on or after 30 September 2013. The Regulations governing directors’ pension disclosures were amended with effect from 1 October 2013. To avoid duplicating matters that are covered by the revised Regulations, the FCA, in September 2013, proposed removing the directors’ disclosure requirements from the Listing Rules for financial years ending on or after 1 January 2014. As a result of feedback received, however, the FCA has introduced the changes to the Listing Rules earlier than expected so that they apply to companies with financial years ending on or after 30 September that had not published their annual financial reports by 13 December 2013 (the date of the announcement). Companies that have already begun preparing reports containing the two different sets of disclosures can still publish them.


Listing Rules pension disclosures continue to apply to overseas-incorporated premium listed companies.


PPF levy ceiling and compensation cap The Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling and Compensation Cap) Order 2014 has been laid before Parliament. The Pension Protection Fund (PPF) determines in advance the amount of levy it will need to raise over the following levy year (which


starts in April). In December 2013, the PPF announced that it intends to raise £695 million for the 2014/15 levy year. The Pensions Act 2004 restricts the amount by which the levy can be increased to 25 per cent of the previous year’s estimate, subject to the levy ceiling. The Order sets the levy ceiling for the year commencing 1 April 2014 at £941,958,542. (The levy ceiling is calculated by increasing the previous year’s ceiling by the increase in average UK earnings, which was 0.9 per cent for the twelve months to 31 July 2013.) So, the levy ceiling will not affect the levy to be collected in the coming tax year. The Order also provides that the compensation cap, which limits the maximum pension paid by the PPF to those who are under normal retirement age when their employer becomes insolvent, will be £36,401.19. The compensation cap also increases each year in line with average earnings, but in this case it is the increase for the twelve months to April 2013, 4.4 per cent, that applied.


VAT on pension provision


In a 2013 decision, the Court of Justice of the European Union (CJEU) said that a business that had set up a legally separate pension fund for its employees was entitled to deduct the VAT it paid on certain services relating to the management and operation of the fund. Her Majesty’s Revenue & Customs (HMRC) has revised its policy on sponsoring employers’ ability to recover value-added tax (VAT) incurred in the running of their defined benefit pension schemes. HMRC concedes that, as a result of the CJEU’s judgment, “there are circumstances where employers may be able to claim input tax in relation to pension funds where they could not previously”. However, the company must establish a ‘direct and immediate link’ between the services received and the taxable supplies that the business makes. Employers will need to identify services that go further than the management of the scheme’s investments, thereby forming part of the employer’s ‘general costs’: it is those that are potentially deductible. There will be no deduction allowed for supplies that are limited to investment management services. The assumption of a 70/30 split for mixed invoices is being withdrawn, except where the scheme is invoiced for the services, in which case it is being retained for a six-month transitional period. Though HMRC has changed its policy, the announcement contains broad principles and no examples, so it is hard to tell exactly what effect it will have in practice. A revised version of VAT Notice 700/17 may shed more light on the matter in due course.


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