Pensions Weekly Update – 5 March 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.

Following on from the government’s consultation on options for defined benefit (DB) pension schemes, the Pension Protection Fund (PPF) has published a paper setting out how it envisions a public sector consolidator for DB schemes (PSC) could be structured. The document notes that “to run a substantive allocation to UK productive finance assets requires the PSC to achieve a significant scale.” The PPF proposes that the PSC should provide standardised benefits for members entering the PSC. It thinks the potential market for the PSC might include approximately 2,400 schemes with roughly £120 billion in assets. It acknowledges that not all of those schemes would be interested in transferring to the PSC, but that the proposed design has the potential to reach a sufficient scale to make significant investment in UK productive finance.
Ahead of tomorrow’s spring budget, the chancellor has announced proposals in the defined contribution (DC) market that would require:

DC pension funds to disclose their levels of investment in UK business, along with costs and net investment return, by 2027
Public comparisons of performance data against competitor schemes, including at least two schemes managing at least £10 billion in assets
Poor performing schemes to cease taking on active members

The Financial Conduct Authority will be tasked with consulting on these new measures.
The government has published its outcome of consultation in relation to proposed changes to the structure and rates of the general levy on occupational and personal pension schemes. We noted in our weekly update on 4 October 2023 that the government consulted on three options. The first option was to leave the levy rates unchanged (but the DWP estimated that this would result in a deficit of more than £200 million by 2031 and this would need to be addressed in future years). The second option was to increase the levy rate by 6.5% for all schemes. The third option (which was the DWP’s preferred option) was to increase the levy by 4% for all schemes – however, small DC schemes with fewer than 10,000 members would pay a premium of £10,000 from April 2026. The government has decided on option two – a rise of 6.5% each year across all scheme categories for levy years 2024-2025, 2025-2026 and 2026-2027. This aligns with the majority of consultation responses received. Draft regulations have been laid before both Houses of Parliament.
The Financial Reporting Council (FRC) has launched its review of the UK Stewardship Code 2020, with a view to publishing the revised code in early 2025. The FRC will take views from various interested parties, including asset owners and managers, and other regulatory bodies such as The Pensions Regulator (TPR). TPR encourages pension fund trustees to sign up to the code in its investment guidance.
Companies House has announced that the first steps in the rollout of its new powers, granted under the Economic Crime and Corporate Transparency Act 2023, came into force on 4 March 2024. The rollout includes new Companies House forms requesting additional information in relation to company formations and confirmation statements. PO Box addresses can no longer be used as a company’s registered office and there will be stronger checks on company names. The new powers effective from 4 March also include power to share data with law enforcement agencies and new criminal offences and civil penalties.
Watch out for our Spring Hot Topics in Pensions, where we will measure up and de-construct the latest developments in pensions. Can you guess the theme for this quarter’s hot topics?