03 April 2024
6 min
Regular round-up of the latest pensions, investments, trusteeship and scheme management news
The House of Commons Work and Pensions Committee (WPC) reported the findings of an enquiry into defined benefit (DB) pension schemes. The WPC concludes that the recently improved state of DB funding has brought new opportunities and challenges, and that well-governed and appropriately regulated schemes can benefit the UK economy and help ensure retirement-savings adequacy.
The Department for Work and Pensions (DWP) has published statutory guidance on the staging timetable for connection to pensions dashboards. The trustees and managers of the largest occupational schemes are expected to be ready to connect in a little over a year’s time.
Background Pensions dashboards are intended to provide scheme members with easy, online access to information about all of their State and private pensions entitlements, with identity verification and other consumer safeguards built into the system. The trustees or managers of occupational and contract-based schemes with more than 100 members will be obliged to connect to the digital dashboards infrastructure, determine whether a person who is seeking details of their pension entitlements is a member of their scheme, and if so return the relevant information (such as pension values) to the person’s chosen dashboard service.
The DWP’s connection guidance takes the original schedule’s broad structure and adapts it for the new, October 2026 connection deadline. There are some notable differences: the membership sizes1 for the DWP’s connection milestones differ from those that appeared in the withdrawn schedule in some cases; the overall timetable has been compressed into a period of roughly 17 months, compared to 26 under the original plan; and it covers both occupational schemes and FCA regulated providers. Nevertheless, the largest schemes are once again in the vanguard: the guidance envisages that connection begins with defined contribution (DC) master trusts with at least 20,000 members, which would connect by 30 April 2025 (the same time as FCA-regulated operators with 5,000 or more members in their schemes). Their deadline under the original schedule would have been 31 August 2023.
The Pensions Regulator is consulting about the form and content of the ‘statements of strategy’ that trustees will be expected to prepare and send to it, under the reformed funding rules for defined benefit (DB) pension schemes. It plans to require use of standardized templates, which will ask for less information from smaller and ‘Fast Track’ schemes. The new funding regime is expected to come into effect for valuations with effective dates from 22 September 2024. In accordance with it, trustees will need to devise a funding and investment strategy (FIS) for the long-term provision of their scheme’s benefits. The FIS will describe how they propose to be fully funded, with low dependency on sponsor support, by the time the scheme is significantly mature; and their journey plan for reaching that state.
The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 20242 make numerous changes to the tax legislation to patch over gaps and defects in the Finance Act 2024's lifetime-allowance abolition provisions. The changes take effect, like abolition itself, on 6 April 2024. The changes made by the Regulations are too numerous to list here. However, His Majesty’s Revenue and Customs (HMRC) has discussed most of them in its February and March Lifetime Allowance Guidance Newsletters.
The Pension Protection Fund (PPF) published a discussion document giving its preliminary thoughts on the features of a public sector consolidator (PSC) for defined benefit pension schemes. The discussion document arrived on the coattails of a Department for Work and Pensions (DWP) consultation paper exploring Options for Defined Benefit Schemes.
The Pensions Act 2004 (Codes of Practice) (Revocation) Order 20245 revoked most of the Pensions Regulator's Codes of Practice, with effect from 28 March 2024, coinciding with the coming into force of the General Code, which was achieved via the Pensions Act 2004 (General Code of Practice) (Appointed Day, Amendment and Revocations) Order 2024. 6 The Regulator had previously indicated that the new Code would be in force from 27 March 2024.
A statutory instrument to reduce the rate of tax on return of pension scheme surplus to a sponsoring employer has been laid before Parliament. It will reduce the ‘authorised surplus payments charge’ from its current level of 35% to 25%, effective from 6 April 2024. The change was announced in the 2023 Autumn Statement. A policy paper by His Majesty’s Revenue and Customs (HMRC) was published alongside the legislation. It estimates that it will cost HMRC £380,000 to update its IT systems. It also reckons that the loss to the Exchequer from the reduced tax charge will be negligible for the next two tax years, and less than £5m a year for each of the three following years (this is the same impact estimate that appeared in the Autumn Statement ‘Green Book’).
The Department for Work and Pensions (DWP) has announced the outcome of its consultation exercise about the future of the general levy. It has abandoned its favoured option, which would have imposed a £10,000 premium upon small defined contribution (DC) schemes, choosing the simpler approach of increasing levies across the board each year.
A flurry of statutory instruments (SIs) appeared in March, before the clocks sprang forward to propel us, sleepy-eyed, into British Summer Time.
The Pension Protection Fund (PPF) is consulting on proposals to allow actuaries of smaller schemes (those with less than £50 million in liabilities) to derive their own discount-rate assumptions for ‘section 143’ (PPF-entry assessment) valuations.
His Majesty’s Revenue and Customs (HMRC) published a March edition of its Lifetime Allowance Guidance Newsletter. Once again, much of it is given over to questions and answers on the details of the post-lifetime-allowance-abolition tax regime. The Newsletter was updated after publication (see the responses to questions 14, 20 and 37).
The scramble to prepare for the abolition of the lifetime allowance continues with Pension Schemes Newsletter 157, which contains another 39 answers to ‘frequently-asked questions’ on the subject.
This communication has been compiled by Hymans Robertson LLP, and is based upon their understanding of legislation and events as at the date of publication. It is designed to be a general information summary and may be subject to change. It is not a definitive analysis of the subject covered or specific to the circumstances of any particular employer, pension scheme or individual. The information contained is not intended to constitute advice, and should not be considered a substitute for specific advice in relation to individual circumstances. Where the subject of this document involves legal issues you may wish to take legal advice. Hymans Robertson LLP accepts no liability for errors or omissions or reliance on any statement or opinion.
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