Pensions Weekly Update – 5 October 2022

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Here is our weekly summary of key legal and regulatory developments relevant to occupational pension schemes, which you might have missed, with links for further information.

The Pension Protection Fund (PPF) has published for consultation its draft levy rules for 2023-24, along with the outcome of its funding strategy review. The PPF says that it is taking active steps to reduce its levy and that it expects almost all schemes will see a decrease in their next levy. The levy estimate for 2023-24 is £200 million, which is £190 million less than the previous year's estimate. There will also be a reduction in the levy-scaling factor by 23% and the scheme-based levy multiplier will reduce by 10%. The PPF proposes that the risk-based levy cap should remain at 0.25% of scheme liabilities but that the easement, limiting any increase from the previous year in the risk-based levy to 25%, will not continue. Consultation closes on 10 November 2022.
The Pensions Regulator (TPR) has updated its climate change guidance, to assist trustees to address the changes in climate change legislation, which came into force on 1 October 2022. These include the requirement to calculate and report on a portfolio alignment metric giving the alignment of the scheme's assets with the Paris Agreement goal of limiting global warming to 1.5 degrees Celsius above pre-industrial levels. TPR says in its press release, “Trustees are being asked to calculate and use this new metric ‘as far as they are able’, which recognises that there may be limits to available data. However, trustees should explain the reasons for any data gaps in the report and set out a plan for improvement."
TPR has issued an action plan on equality, diversity and inclusion (EDI), which includes an update on the work being undertaken by the Diversity and Inclusion Industry Working Group. We welcome TPR’s confirmation that it will clarify its expectations on EDI in the new single code of practice – this was one of the suggestions that we made in our consultation response.
Mike Birch, Director of Supervision at TPR, has issued a blog stating how employers and bidders should engage with pension scheme trustees when structuring any acquisition or financing package. “Employers and bidders in M&A scenarios are equally responsible for protecting pension savers as the trustees – they must all work together on equal terms to ensure the best possible outcome is reached.”
The chancellor has announced that the additional rate of income tax (i.e. the 45% rate) will not now be abolished from 6 April 2023. This is a reversal of the decision announced in the fiscal statement of 23 September 2022, which we reported in last week’s pensions update.
Happy 10-year anniversary to automatic enrolment! This legislation has been very successful in bringing more than 10 million people into pensions savings, although there are ongoing debates around contribution adequacy.
Did you spot Matthew Giles' alternative take on the single code of practice in his Ode to the Code on LinkedIn – with illustrations by Catherine McKenna?
In our Pensions and Benefits blog, Matthew Giles and Grace Walker take a look at the increasing popularity of TPR's pension scams pledge with pension trustees.