Pensions Bulletin 2023/48
Pensions & benefits Pensions dashboards Policy & regulation
- MaPS annual report and accounts reveals that the pensions dashboard was given a ‘code red’ in July 2022
- DB funding – Pensions Regulator wants to assess capital backed journey plans
- DWP issues latest benefit and pension rates
- State pension transitional protection increases put through
- NIC reduction Bill published
MaPS annual report and accounts reveals that the pensions dashboard was given a ‘code red’ in July 2022
The Money and Pensions Service has published its annual report and accounts for the year ended 31 March 2023 revealing that the pensions dashboards programme (PDP) had been on official red alert for many months before the DWP announced the reset in March 2023.
Pensions dashboard problems first identified in July 2022
In the report MaPS acknowledges that the dashboard was a key risk that crystallised for the organisation during 2022/23 with the programme going into reset in March 2023. But further on in the report it appears that problems became apparent in July 2022 when the separate Infrastructure and Projects Authority returned a red “Delivery Confidence Assessment” on the PDP, setting out its view that successful delivery of the project appeared unachievable. After some further work MaPS wrote to the DWP in December 2022 informing them that the delivery timetable was not achievable.
The report concludes with an assurance that the work being undertaken through the reset will see the programme put back on a viable footing, but it won’t be until late spring 2024 that a full assessment of a revised business case, setting out the programme’s costs and benefits, is carried out.
Pension costs increase – but those relating to the dashboard fall
Turning to the numbers in the accounts themselves, there was a modest increase in MaPS overall expenditure (to £155.8m, compared with £150.4m in the previous year), but while the overall costs for its money guidance and debt advice operations were pretty much unchanged, there was significant growth in MaPS pension costs which increased from £45.9m to £51.4m.
This is the first year MaPS has subdivided its pensions costs into three segments – the two traditional segments on pensions guidance and pensions freedoms, and the newly created segment on pensions dashboard. This provides some timely insight into the separate costs to each of these segments, and in particular shows that the cost of running the pensions dashboard service was £8.1m for the 2022/23 year, which is less than half of the £16.8m in the 2021/22 year that appears in this year’s accounts (although last year’s accounts point to a cost of around £13.4m for the year). There is no indication of the likely level of costs for 2023/24.
The pensions guidance service covers a wide range of pensions-related matters, including the pension safeguarding appointments that operate where a DB transfer out request raises an amber flag. The pensions guidance service delivered 227,226 sessions – up by around 41,400 on last year, as well as 711,848 digital tool completions. And the overall cost of running this service increased from £4.9m to £9.0m, although there is no separating out of the cost of running the safeguarding appointments.
The pension freedom service relates to the Pension Wise guidance provided to those who have DC pension pots and who need to understand their options in order to make an informed decision when taking their benefits. This delivered 243,068 sessions – up by around 38,600 on last year. And the cost of running this service increased from £24.1m to £34.4m.
Comment
The revelation that things were going wrong with the pensions dashboard getting on for nine months before they were publicly acknowledged is of note, as is that in a year in which one would have expected spending on it to increase, it more than halved. It surely is time for MaPS to set out what exactly the issues were, what was the original budget to deliver the dashboard and how much extra levy payers are going to need to find so that MaPS can get this project over the line.
DB funding – Pensions Regulator wants to assess capital backed journey plans
In a blog that heralds the publication in the New Year of guidance on “alternative arrangements” that DB trustees may be considering, Mike Birch, Director of Supervision at the Pensions Regulator, focuses on capital backed journey plans. These, in general, involve a third party providing additional capital to support the risks in the scheme with the scheme’s assets being invested in a higher expected return portfolio.
Capital backed journey plans may be a good option for some schemes when customised to their specific circumstances, but they won’t work for everyone. Given this, the Regulator intends to carry out assessments against relevant parts of its superfund guidance (see Pensions Bulletin 2023/32) where they are proposed for use. Trustees are asked to engage with the Regulator and the employer as early as possible, with the Regulator expecting to take between two and six months to assess the arrangements being proposed. The Regulator would generally expect to confirm publicly where a particular proposal has been assessed as meeting the relevant expectations from the superfund guidance.
Comment
Whilst we can see the logic for the Regulator to assess these arrangements, it is not clear whether it is the arrangements on their own that are being assessed or as they are being proposed to apply to a particular scheme. It is also not clear what powers the Regulator has to call in these arrangements for assessment.
However, a capital backed journey plan is an example of a funding arrangement that would need to follow the ‘bespoke’ approach under the much-delayed new scheme funding regime, so perhaps that is where the Regulator’s assessment authority is going to come from. We will need to see delivery of the new scheme funding regime in the early New Year if it is to start in April 2024 and on this there has been pretty much silence from the DWP since the consultation on the necessary funding and investment regulations closed in October 2022 (see Pensions Bulletin 2022/38).
DWP issues latest benefit and pension rates
Following the Autumn Statement, the DWP has issued a list of the proposed benefit and pension rates that will operate from 2024 to 2025. These include the following:
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The new State Pension – which increases from £203.85 pw to £221.20 pw
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The old Basic State Pension – which increases from £156.20 pw to £169.50 pw
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The standard minimum guarantee of the Pension Credit – which increases from £201.05 pw to £218.15 pw for single people and from £306.85 pw to £332.95 pw for couples.
Comment
As announced at the Autumn Statement, many social security benefits increase in line with the rise in the CPI of 6.7% for the year to September 2023, whilst State Pensions are this year rising in line with an earnings measure of 8.5%.
State pension transitional protection increases put through
Two sets of regulations have been laid which for those reaching State Pension Age on or after 8 April 2024:
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Increase that part of any transitional new State Pension, which when calculated as at 6 April 2016, was above the then full rate (the “protected payment”), by the increase in the CPI (so by 31.7% for the eight year period ending on 5 April 2024)
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Increase that part of any pension debit or credit on divorce, that has been applied to such a “protected payment”, by the increase in the CPI since the debit or credit was created on or after 6 April 2016
The State Pension Revaluation for Transitional Pensions Order 2023 (SI 2023/1269) and The State Pension Debits and Credits (Revaluation) Order 2023 (SI 2023/1270) come into force on 8 April 2024 for most purposes.
Comment
These are part of the annual adjustments necessary to the new State Pension and are broadly as expected.
NIC reduction Bill published
Following the announcement about reductions in national insurance contributions in the Autumn Statement (see Pensions Bulletin 2023/47) a Bill to make provision for and in connection with reducing the main rates of primary Class 1 NICs and Class 4 NICs, and removing the requirement to pay Class 2 NICs, has been introduced to Parliament.
The National Insurance Contributions (Reduction in Rates) Bill is due to complete all its House of Commons stages on 30 November 2023.
This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law. For further help, please contact David Everett at our London office or the partner who normally advises you.
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