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.
The Pension Protection Fund (PPF) has published its consultation on the PPF levy rules for 2024-25. It proposes setting the PPF levy for 2024-25 at £100 million, which is half of the 2023-24 estimate. This does, however, have a small knock-on effect on the levy scaling factor (LSF) and scheme-based levy multiplier (SLM), to keep the scheme-based levy within the maximum of 20% of the total levy (as required by legislation). The PPF proposes setting the LSF at 0.40 (compared with 0.37 in 2023-24) and setting the SLM at 0.000015 (compared with 0.000019 in 2023-24). The risk-based levy cap would remain at 0.25% of scheme liabilities. Overall, the PPF expects that 99% of schemes would see a reduction in their levy amount. The PPF says that schemes should see, on average, a 25% reduction in their scheme-based levy.
The PPF indicates that, for as long as its funding levels remain strong, it proposes continuing to seek a levy estimate of £100 million in future years. Owing to a provision in legislation, which means the PPF cannot raise the levy estimate by more than 25% year on year, the PPF cannot reduce the levy amount to zero (because then it could never increase it if conditions meant a higher levy amount were required). The PPF suggests that £100 million is the figure that appears to strike the right balance.
The PPF notes, however, that it faces a conundrum. To continue to achieve a £100 million levy estimate in 2025/26 and beyond, some schemes could see their levy increase significantly as the pool of risk-based levy payers diminishes, so proposals on a different methodology are being considered.
The PPF proposes maintaining a separate levy structure for defined benefit (DB) superfunds, which are commercial in nature and should not benefit from funds generated by levies paid in previous years by traditional DB pension schemes.
Timing-wise, the consultation closes at 5 p.m. on 30 October 2023. The PPF expects to publish its final levy rules by the end of December 2023. The usual deadline of midnight on 31 March 2024 will apply for the submission of scheme returns, electronic contingent asset certificates, asset-backed contribution certificates and special category employer certificates, with supporting contingent asset documentation to be submitted to the PPF by 5 p.m. on 2 April 2024.
The Local Government Pension Scheme (Amendment) (No. 3) Regulations 2023 were laid before Parliament on 8 September 2023 and come into force on 1 October 2023. The purpose of the regulations is to amend the Local Government Pension Scheme (LGPS) to address the discrimination that arose as a consequence of protections provided to older members of public service pension schemes when those schemes were reformed in 2014 and 2015. In McCloud, the court held that the protections discriminated against younger members on grounds of age. The latest regulations amend the LGPS so that “the statutory underpin”, the mechanism through which older LGPS members closest to retirement were protected, is extended to the scheme members who were discriminated against (i.e. those who were too young to receive protection under the original changes).
October is traditionally a time for pensions legislation. The following is a reminder of what we are expecting in the next couple of months.
Draft regulations are expected to be published in the autumn on extending collective defined contribution provision to whole-life multi-employer schemes, including master trusts.
On 12 September, consultation closed on draft legislation for the Finance Bill 2024, which includes provisions relating to the abolition of the lifetime allowance. It is hoped that the finalised regulations will be published in good time for schemes and their administrators to take the necessary actions before 6 April 2024.
Also in the autumn, The Pensions Regulator will be checking the content of implementation statements and the Department for Work and Pensions will be checking that statutory guidance in relation to implementation statements has been followed.
It is Pensions Awareness Week, which is advertised as “Bigger than ever. Better than before.” To help raise awareness in a different way, we have launched our new Pensions Life Hacks series, to help trustees get to grips with tricky situations. Yesterday’s Life Hack was concerned with liquidity control measures and tomorrow we will focus on data privacy notices. More to follow in the coming weeks!
If you would like specific advice on any of these issues or on anything else, please contact a member of our Pensions team.