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.
While the chancellor's autumn statement was short on detail, the package of pensions measures contained in the background papers to the autumn statement are substantial. We set out links to the main documents below.
Pensions reform 2023 – This is the key document, which summarises the headline pension reforms and proposals, including:
The introduction of a multiple default consolidator model for defined contribution (DC) schemes, to enable a small number of authorised schemes to act as a consolidator for eligible pension pots under £1,000.
The launch of a call for evidence on a pot for life.
A proposal placing duties on DC occupational pensions trustees to offer decumulation services and products.
A drive towards DC consolidation and a consultation this winter on the Pension Protection Fund (PPF) acting as a consolidator for small defined benefit (DB) schemes that are unattractive to commercial consolidators.
Confirmation that a March 2025 deadline will be set for the accelerated consolidation of Local Government Pension Scheme (LGPS) (England and Wales) assets, setting a direction towards fewer pools exceeding £50 billion assets under management, and implementing a 10% allocation ambition for investments in private equity.
A consultation this winter on whether changes to rules around when DB scheme surpluses can be repaid, including new mechanisms to protect members, could incentivise investment by well-funded schemes in assets with higher returns.
A reduction in the authorised surplus payments charge from 35% to 25% from 6 April 2024.
The Pensions Regulator (TPR) will implement a register of trustees and update the trustee toolkit.
A focus on shifting employer incentives away from low fees towards long-term pension investment performance.
Support for new investment vehicles tailored to the needs of pension schemes to encourage greater investment into high-growth companies. This includes investment opportunities stemming from the Long-term Investment for Technology and Science initiative, a new Growth Fund that will be established within the British Business Bank to invest in “the UK’s most promising businesses” and measures to strengthen the UK’s venture capital industry, building on the recent BVCA Venture Capital Investment Compact.
Trends in the DC trust-based market – This publication provides high-level estimates of the changing pension landscape since the roll-out of automatic enrolment (AE) and assesses the potential outlook by 2030. The overall aim is to show the growing importance of the pensions industry, the emerging evidence around market consolidation and the potential benefit to members.
Pensions investment reform – The chancellor and Mel Stride, the secretary of state for work and pensions, issued letters to TPR and the Financial Conduct Authority confirming the government’s long-term pensions agenda, recognising the significant work that both regulators are already undertaking to support many of the government’s priorities and welcoming their continued support to achieve these aims.
Triple lock – The chancellor confirmed in the autumn statement that the triple lock would be retained for 2024-25. The basic state pension, new state pension and pension credit standard minimum guarantee will be uprated in April 2024 in line with the average earnings growth of 8.5%. This means that the new full state pension will increase by £17.35 per week to £221.20 per week.
In our weekly update of 20 September 2023, we noted that the Department for Work and Pensions had laid before Parliament two sets of draft regulations incorporating into UK legislation the outcome of four court decisions deriving from EU law and relating to equal treatment and PPF compensation. In a debate of the Grand Committee of the House of Lords on 14 November 2023, it was agreed to approve the draft regulations. During the debate, Viscount Younger of Leckie confirmed that the draft regulations maintain the existing status quo. Viscount Younger also confirmed that, with the exception of the Bauer decision, there is no other retained EU law relating to pensions, so far as he is aware, that would be sunsetted at the end of 31 December. He said that the government intends to allow the Bauer decision to fall away. Bauer is a 2019 decision of the Court of Justice of the European Union, the effect of which (broadly speaking) would have required the PPF to provide compensation at a level above the poverty line. This would have been tricky to implement and might have required the PPF to assess the income of members individually to determine the appropriate level of compensation for each member. Viscount Younger also said in relation to the Pensions (Extension of Automatic Enrolment) Act 2023, "consultation on implementation is coming soon".
If you would like specific advice on any of these issues or on anything else, please contact a member of our Pensions team.