Pensions Bulletin 2024/14
Pensions & benefits Pensions dashboards Policy & regulation
- Funding and investment regulations issued in final form
- More changes to the new pensions tax regime promised following LTA abolition
- PDP blog on Dashboards connection timetable confirms first connections expected this August
- New FAS cap announced
Funding and investment regulations issued in final form
The regulations that implement the new DB funding regime have now been made in their final form having been approved by both Houses of Parliament.
The regulations were first laid before Parliament in draft form in January (see Pensions Bulletin 2024/04), but had to be laid again in modified draft form in February (see Pensions Bulletin 2024/09) to address some technical failings.
The now final Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024 (SI 2024/462) came into force on 6 April 2024. However, the contents are only applicable in respect of actuarial valuations with effective dates on or after 22 September 2024.
The DWP has also laid a Commencement Order that brings into force, from 6 April 2024, necessary changes to the scheme funding provisions of the Pensions Act 2004, legislated for by the Pension Schemes Act 2021 – in particular, the requirement for trustees to set a funding and investment strategy. As with the regulations above, these changes are only applicable in respect of actuarial valuations with effective dates on or after 22 September 2024.
Comment
As all the legislation governing the new scheme funding regime is now in place, attention now turns to the Regulator’s materials which need to be finalised, and in some cases, issued for the first time. Our latest understanding is that the draft Code of Practice will be laid before Parliament by early June 2024. Around the same time the Regulator will set down its Fast Track parameters. The covenant guidance consultation is expected in the summer and the investment guidance will be published later.
More changes to the new pensions tax regime promised following LTA abolition
As we have warned on a number of occasions, abolishing the Lifetime allowance was never going to be easy to implement and the latest HMRC newsletter, issued on 4 April 2024, which is devoted predominantly to LTA abolition issues, proves the point once more.
More amendments to the legislation
After an introduction Pension schemes newsletter 158 focuses on the need for further amending regulations to address a number of technical concerns. Under numerous headings, the newsletter sets out the technical issue, the changes which will be made by regulations to address the issue and, in some cases, guidance on how schemes and members should operate before the changes come into force. In particular, HMRC says that until amending regulations are made schemes should ensure that potentially affected members are aware of the need for further legislative changes and in particular that:
- Members with enhanced protection may wish to delay transferring to a new provider, as otherwise they will lose this protection
- Members with enhanced and primary protection lump sum rights of more than £375,000 who wish to take a tax-free lump sum (PCLS) may either take up to £375,000 or delay payment in order that they can take their full entitlement
- Members who wish to take a PCLS under scheme-specific lump sum protection may wish to delay taking it. Three separate issues are highlighted
- Legal personal representatives of deceased members may wish to delay requesting the payment of a lump sum death benefit where the payment would be made from funds which crystallised prior to 6 April 2024
- Members in two specific circumstances who wish to transfer their pension rights to a QROPS may wish to defer this request
Public service pensions remedy – impact of LTA abolition
There is also a very detailed section on the impact of LTA abolition on the McCloud remedy being applied across public sector schemes. All this is in the nature of guidance. There does not appear to be any need to make any further changes to the pensions tax legislation in this respect.
Separately, HMRC continues to adjust the Pensions Tax Manual to reflect LTA abolition. A further newsletter will be published later in April.
Comment
Trustees and scheme administrators will need to urgently decide what adjustments to processes need to be put in place ahead of the promised amending regulations. It is vital that these regulations appear without further delay so that the period for which schemes and members have to operate in such uncertainty is as short as possible.
PDP blog on Dashboards connection timetable confirms first connections expected this August
Following the recent publication of the Dashboards connection timetable guidance (see Pensions Bulletin 2024/12), Chris Curry, Principal of the Pensions Dashboards Programme (PDP), has written a blog setting out its expectations and reinforcing several messages from the guidance.
An interesting point to note in the blog is confirmation that more than 20 volunteer participants are expected to connect from August 2024, ie just four months away.
The blog restates that whilst the connection dates are not mandatory, pension providers and schemes must have regard to the guidance and that trustees will need to be able to demonstrate upon request how they have considered the guidance when planning their connection to the ecosystem. The blog reminds readers that failure to do this could result in action by the relevant regulator (ie TPR or FCA).
Mr Curry goes on to state that the PDP has been encouraged by the feedback they’ve had from pension providers who intend to adhere to the connection dates in the guidance.
Mr Curry’s blog concludes by stating the benefits of following the staging timetable in the guidance which includes managing onboarding in a stable and staggered way and supporting more extensive user testing which should result in the service being available to the public as soon as possible.
Comment
The messages in PDP’s blog are unsurprising and reinforce expectations that schemes should follow the timetable in the guidance. As we said two weeks ago, trustees should now definitely have dashboards connection on their “to-do” list.
New FAS cap announced
The Pension Protection Fund has announced that the cap on the amount of expected pension that it can take into account when working out assistance payments under the Financial Assistance Scheme (FAS) has increased, with effect from 1 April 2024, to £44,695 pa, up from £41,888 pa previously. This increase reflects the level of inflation over the period. The new cap will apply to all members retiring on or after 1 April 2024.
Comment
The Financial Assistance Scheme has had its level of assistance capped since its inception, but unlike the Pension Protection Fund has not been required to remove the cap.
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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