Pensions Weekly Update – 31 January 2024

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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 draft Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024 have been laid before Parliament and are due to come into force on 6 April 2024 (subject to parliamentary approval). The regulations will apply in relation to scheme valuations from 22 September 2024 onwards. They supplement the provisions of schedule 10 of the Pension Schemes Act 2021, which amended part three of the Pensions Act 2004 and introduced the requirements for trustees to have a funding and investment strategy, as well as a statement of strategy. The Department for Work and Pensions (DWP) has also published its outcome of consultation in relation to the draft regulations. The DWP has taken on board many of the comments made during the consultation process. The draft regulations have been amended to make it clear that trustees will still have the flexibility to invest in a manner that is appropriate to the needs of each scheme. Concerns had been raised that the regulations as originally drafted would require the trustees of mature schemes to call for employer contributions at a level that could hinder the ability of the employer to invest for future growth. The draft regulations have been amended to clarify that investment in the sustainable growth of the employer’s business is a matter to consider alongside the affordability principle. The draft regulations have also been amended to make clear that open schemes can take account of new entrants and future accrual when determining when a scheme will reach significant maturity. The regulations will require every defined benefit scheme to have a chair of trustees, who will sign off on the new statement of strategy. Under the regulations, a statement of strategy must be sent to The Pensions Regulator (TPR) as soon as reasonably practical after it has been prepared or revised, whether this is in or out of cycle with an actuarial valuation. In relation to multi-employer schemes that have sections treated as separate schemes for the purposes of the scheme funding regulations, they will also be treated in that way for the purposes of the new regulations.
TPR has issued guidance for occupational pension scheme trustees on investing in private market assets. The guidance outlines the different types of investment opportunities and the key considerations for trustees of both defined benefit and defined contribution schemes. TPR says that with the right advice and effective governance, private market assets can play a valuable part in a diversified portfolio that aims to improve member outcomes. The guidance follows on from the Mansion House package of pension reforms and the government’s previously stated aims to encourage pension funds to invest in ways that support UK economic growth.
HM Revenue & Customs (HMRC) newsletter 155 contains an update on the abolition of the lifetime allowance (LTA) legislation, the answers to some frequently asked questions and HMRC’s plans for further LTA communications. HMRC highlights where it believes that further legislation will be necessary to address some industry concerns. HMRC is organising two working groups in February on LTA reporting and transitional arrangements – contact details are provided for those who wish to attend. The newsletter also addresses several other matters, including updates on HMRC’s Managing pension schemes service and relief at source.
In our weekly update on 1 November 2023, we noted that the Economic Crime and Corporate Transparency Act 2023 had received royal assent, and we gave an overview of the parts of the act that might impact pension trustees. Companies House has announced that it is aiming to introduce the first set of changes by 4 March 2024, subject to the availability of parliamentary time (because the changes require secondary legislation to be put in place). The first set of changes include greater powers for Companies House to query information and request supporting documents, a requirement for all companies to supply a registered email address and powers to share data with other government departments and law enforcement agencies. Other measures, such as the identity verification process that will be introduced for all directors of UK companies, and people with significant control, will be introduced at a later date.
The Local Government Pension Scheme (LGPS) Advisory Board has posted an update on the issue of LGPS members opting out of the LGPS on the basis of religious beliefs and whether this might constitute unlawful discrimination on the part of the LGPS. The update notes that the board had previously taken counsel’s opinion on the subject, which recommended instructing an expert in Islamic finance to provide advice on the issue of whether the LGPS is Sharia compliant. The board commissioned Mufti Faraz Adam of Amanah Associates to produce a report, the contents of which are now available. The report notes that Sharia compliance within the LGPS reflects a complex landscape. The report provides some comfort to Muslim members while also making recommendations as to how the LGPS could become more inclusive over the long-term. The board has said that it will now seek final advice from counsel on the subject.