Pensions Bulletin - September 2024

Welcome to the latest edition of our Taylor Wessing Pensions Bulletin which gives a snapshot of some recent developments from a legal perspective. These include: 

• Call for evidence launched in connection with the first phase of the Government's Pensions Review.
• The Pensions Regulator (TPR) finalises its compliance and enforcement policy in relation to pension dashboards.
• Recent HMRC newsletter confirms further amending regulations to be introduced following Lifetime Allowance abolition.
• Pension Protection Fund (PPF) consults on the 25/26 levy.
• TPR issues an interim response to its consultation on scheme funding statements of strategy.
  
   

Please get in touch with your usual Taylor Wessing pensions contact if you would like to discuss anything you have seen in the Bulletin.

Government's Pensions Review – call for evidence for the first phase

In our August pensions bulletin we confirmed the Government's publication of the terms of reference for the first phase of its Pensions Review (the Pensions Investment Review). There has been a call for evidence (which ran for a short period from 4-25 September) to inform that first phase which covered three main areas - scale and consolidation, cost vs value and investing in the UK. On consolidation, the consultation included questions around the role single employer trusts might play in a more consolidated DC market, as well as master trusts and GPPs and there were more generally also questions about the roles and responsibilities of trustees and investment governance committees. 

The consultation also looked at what advantages and risks there might be for savers in a more consolidated DC market, the potential for more consolidation in the LGPS, and also the case for having additional incentives or requirements for the LGPS and DC funds to allocate funds to UK assets.

The Government is proceeding at pace on this, which reflects its priority of taking forward its Pensions Review, possibly driven by the 30 October date for the budget when further pension announcements may be made. It seems there will also be further opportunity for input as the Government has also said that it intends to engage extensively with stakeholders through meetings and workshops on the topics.

TPR finalises its compliance and enforcement policy in relation to pension dashboards

TPR published a blog confirming the finalising of its compliance and enforcement policy in relation to pension dashboards. Although the policy is aimed at the trustees and managers of occupational pension schemes it recognises that to connect with dashboards, schemes will rely on third parties such as employers, administrators and integrated service providers (ISGs). As the regulations will allow TPR to pursue these third parties in certain circumstances where trustees and managers have breached their obligations because of these third party actions, the policy is also for them.

The main message for now is for trustees to read the guidance and to continue preparing, particularly by ensuring their scheme data is 'robust and accurate'. TPR has said it will be engaging with schemes this Autumn about their efforts in this regard and may take regulatory action where schemes are failing to meet its expectations. TPR will also be able to monitor compliance via regular data from the dashboard system run by the Money and Pensions Service.

With the timetable having been pushed back in relation to dashboards there is a danger that preparation may have taken a lower priority for trustees, though having good data quality is fundamental to good scheme administration in any event. All schemes and providers in scope are legally required to be connected to the pensions dashboards ecosystem and be ready to respond to requests for pensions information by 31 October 2026 at the latest, though many will have to be connected far sooner than that. It is therefore vital that schemes make data quality a priority and continue with connection planning – our outline of what is involved can be found here, including a consideration of key data protection issues around data sharing. 

Lifetime Allowance abolition – HMRC confirms further amending regulations 

In our April pensions bulletin, we mentioned the abolition of the Lifetime Allowance (which took effect from 6 April this year) and that there remain a number of outstanding issues. These issues include matters relating to specific protections, members wishing to transfer to qualifying recognised overseas pension schemes (QROPS), and clarifying the rules affecting members who take some benefits pre and post 6 April 2024. HMRC carried out a consultation on the necessary measures to address these issues and has now confirmed that regulations will be introduced 'as soon as Parliamentary time allows'. It is hoped that this will tie up the loose ends in relation to the legislation but trustees should liaise with their advisers about the operation of the provisions and any member communications that may be required both in the interim and as a result.

PPF consults on its 25/26 levy

The PPF has issued a consultation on its levy proposals for the 25/26 year setting the proposed total amount at £100 million, the same as 24/25 and lowest ever. The consultation also includes measures that will make it simpler for schemes to get levy credit for deficit reduction contributions and although it will not make changes to the rules to reflect the risk- matching brought about by buy-in contracts (which many schemes have entered into) the PPF has said it will support schemes that have a full buy-in insurance contract to make levy waiver applications. It has also said that it intends to maintain the levy at £100 million unless there is a significant change in legislation or the risks it faces, but that it will continue to work with the Government to make the necessary legal changes to reduce the levy further. The consultation closes on 23 October and indicates that the PPF expects that over 95% of schemes will pay a lower levy overall than in comparison with 23/24.

TPR issues an interim response to its Statement of Strategy consultation

DB pension schemes, particularly those with valuation dates soon after 22 September 2024 should be familiarising themselves with the requirements of the new scheme funding regulations which came into force on 6 April (see our previous pensions bulletin on this). As part of this regime, schemes are normally required to submit to TPR a statement of strategy as soon as reasonably practicable after having determined or revised their funding and investment strategy. In accordance with regulations, TPR has now determined this statement must be submitted in digital form and it is developing a digital submission system which will be launched 'in the Spring'. TPR consulted on its approach to the statement earlier this year and has now issued an interim response so that trustees and employers can start to understand the revised approach as soon as possible and ahead of the full response which is expected in the 'winter'. It has also given information for trustees and employers to help them in undertaking valuations in line with the new funding requirements. Of note is that TPR has reduced the amount of data it will be requiring in the statements in certain scenarios, such as for 'low risk' schemes (those that satisfy certain criteria such as where schemes follow a Fast Track approach and all the benefits have been secured with an insurer) and small schemes. 

TPR has also published illustrative templates for the statements of strategy to reflect TPR's data requirements to allow advance planning. With the guidance and framework still rolling out, schemes will need to stay up to date with developments.