Here is our weekly summary of key legal and regulatory developments relevant to occupational pension schemes that you might have missed, with links for further information.
HMRC’s Newsletter 148 clarifies some issues resulting from changes to pensions tax allowances announced in the Spring Budget 2023 (which we noted in last week’s alert). For some individuals, gates have reopened to making new savings in registered pension schemes. Financial advisers will be busy assisting high-earning individuals to understand their options in the short term (e.g. before the end of this tax year) and in the longer term. In the meantime, here are some of the pressure points for trustees and sponsoring employers.
Expect an increase in questions, especially around joining or rejoining a pension scheme.
Ensure that administration systems are equipped to deal with changes to the annual allowance (including the money purchase annual allowance and the tapered annual allowance), the lifetime allowance and the cap on the tax-free lump sum.
Consider the impact on pension scheme communications, including scheme booklets/website and benefit statements.
Particular care should be taken where the current allowances are incorporated into scheme design or documentation – beware of unintended consequences.
Note that some members may now wish to defer their retirement plans to a future tax year.
Benefits that fall outside of registered pension schemes (such as excepted group life assurance arrangements and unregistered top-up schemes for high earners) should be reassessed in light of the pensions tax changes.
Be careful not to stray into areas of financial advice when dealing with individual members or employees.
This is a significant change to the taxation of pension savings. Consider seeking advice on the impact of these budget changes.
Following the statement earlier this month by Pensions Minister Laura Trott about the reset of the Pensions Dashboards Programme (PDP), the PDP has published a selection of answers to frequently asked questions (FAQs) on connection deadlines and the revised timeline. Note also that The Pensions Regulator (TPR) has made significant updates throughout its Initial Guidance on pensions dashboards, including changes to reflect Laura Trott’s statement and Money and Pensions Service standards. A clear message coming out of both the PDP FAQs and TPR’s updated Initial Guidance is that, although connection deadlines may be pushed back, pension scheme preparations for pensions dashboards should continue (TPR’s Initial Guidance contains a revised preparation checklist, for pension scheme trustees and managers to refer to).
We noted in our weekly update of 8 March 2023 that the government was supporting The Pensions (Extension of Automatic Enrolment) (No. 2) Bill, a Private Members' Bill that would introduce powers for the Department for Work and Pensions (DWP) to make regulations to (1) lower the age for automatic pensions enrolment from the current age of 22 and (2) lower or reduce the lower earnings limit for qualifying earnings. Laura Trott, the pensions minister, has confirmed that there will be a consultation in the autumn on the implementation approach and timetable.
The Pension Scams Industry Group (PSIG) has published interim guidance for practitioners summarising the 2021 transfer regulations and their impact, flagging risks and suggesting practical steps that transferring pension schemes can take in connection with the processing of transfer requests. This has been published as a standalone guide, rather than an update to the existing Code of Good Practice, while further clarification is awaited from the DWP regarding the drafting of the regulations. (PSIG has indicated that the code will be amended once the regulations are clarified or amended.)
TPR has published guidance on employer-related investments for trustees, advisers and employers. It highlights the importance of being of aware of which types of investments are prohibited and the consequences of breaching statutory limits on employer-related investments.
The Work and Pensions Committee has launched a call for evidence in relation to its inquiry into the future of defined benefit (DB) pension schemes and the challenges and opportunities that they pose to members, trustees, employers and TPR. The deadline for responding is 26 April 2023.
TPR has published a blog clarifying its focus on the draft new value for money framework, its approach and what it hopes to achieve.
In last week's update, we reported that there is a new data protection and digital bill making its way through Parliament. Read some thoughts on the new bill from our colleagues in the Data Privacy, Cybersecurity & Digital Assets team in this blog.