In the third issue of our Taylor Wessing Pensions Bulletin we give a snapshot of the latest pensions developments below.

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

Important pensions case says historic amendments may be void

A recently decided case involving the National Transcommunications Limited Pension Plan could have wide-ranging implications for pension schemes and corporate transactions.  The case relates to amendments affecting "Section 9(2B)" rights.  These are rights that schemes that were contracted out on a salary-related (or "reference scheme") basis were required to provide between 6 April 1997 and 5 April 2016.   The judgment says that if an actuarial certificate under Section 37 of the Pension Schemes Act 1993 was not obtained in relation to an amendment, it will be void. This is the case whether the amendment is adverse or beneficial, and whether it affects rights in respect of past service or not.  Our full alert on the case can be read here.

Pension Dashboards

Following a "reset" of the dashboards programme timetable, the DWP has now announced that all schemes will need to connect by 31 October 2026.  A revised staging timetable which will set out when schemes (by size and type) must connect will be set out in guidance in due course.   Once this is published, trustees will need to identify their new connection window and connection deadline, and work with their administrator to revise their project plan so that they are ready to connect when the time comes.

TPR has published a blog in which it notes that its dashboard readiness tracker has revealed that many schemes' data quality is not what it should be. The biggest issues are (perhaps unsurprisingly) with deferred member data, historical data gaps, members not updating details, and problems with data quality from employers. TPR's drive to improve data quality has been ongoing for some years, but the dashboards programme will represent a crunch point for schemes whose data is inadequate, with heightened risks that they fail to comply with their obligations as a result.

DWP's review of transfer regulations

The DWP has published its review of the regulations that deal with statutory transfers.  These came into force in November 2021 and introduced a new regime primarily aimed at reducing the risk of pension scams.  Broadly this regime says that statutory transfers can only proceed where certain conditions are satisfied,  but there have been practical issues where legitimate transfers could not proceed as a result.  In particular:

• where an incentive is being offered to transfer this gives rise to a "red flag" which means the transfer must not proceed, and  
• where there are overseas investments in the receiving scheme, this gives rise to an "amber flag" which means that the member must obtain guidance before proceeding.  

The DWP has said it will work further with the pensions industry and TPR in considering whether changes to the regulations might help improve the transfer process without compromising the policy intent behind them.

Work and Pensions Committee recommends delay in introduction of new scheme funding regime

The Work and Pensions Committee has been conducting an enquiry on the LDI crisis that affected many pension schemes and the wider economy last year and it has published its first report. The main themes emerging are around the need for better data around LDI and also better governance in pension schemes.  It has made a number of recommendations which include: 

• the DWP and TPR halting existing plans for a new funding regime (which has already been pushed back to April 2024) at least until a full impact assessment has been provided for the proposals including the impacts on financial stability and on open defined benefit pension schemes. This follows the Financial Policy Committee's recommendation for TPR to take account of financial stability as part of its regulatory activities
• the DWP publishing a response to its consultation on consolidation of pension schemes by the end of October 2023. TPR has suggested that better governance could be achieved by reducing the number of smaller schemes through consolidation, but WPC says that must be done 'safely' and will require legislation
• the DWP working with TPR as a priority to improve regulation of trustees and standards of governance. Given the time it takes to consult and legislate, the report says that the DWP should consider whether or not the use of LDI should be restricted – for example by requiring trustees to pass a test related to their ability to understand the risks involved.