Pensions Bulletin 2024/27

King’s Speech promises a Pensions Bill

The first King’s Speech of the new Parliament was delivered on 17 July 2024, and amongst the many Bills the Government intends to take through in this parliamentary session is a Pension Schemes Bill.

This Bill appears to deliver on a number of topics that were on the previous Government’s agenda. They include the following from the former Chancellor’s “Mansion House” initiative:

• Implementing auto-consolidation of small DC pension pots. This follows the DWP’s July 2023 decision to deliver an “authorised and multiple default consolidator model” for addressing the current “stock” of deferred small pots (see Pensions Bulletin 2023/28).  
• Establishing a value for money framework for DC schemes to drive consolidation and improve outcomes. This follows the DWP’s July 2023 announcement that the DC value for money framework is to go ahead (see Pensions Bulletin 2023/28).
• Requiring post-retirement ‘products’ for DC decumulation. Back in July 2023 the DWP committed to legislate “when parliamentary time allows” for a new duty on DC trustees to offer decumulation services which are suitable for their members and consistent with pension freedoms (see Pensions Bulletin 2023/28).
• Establishing commercial superfunds for DB schemes. In July 2023 the DWP announced that it would go ahead with a new authorisation and supervision regime for commercial vehicles offering to consolidate DB pension schemes (see Pensions Bulletin 2023/28).

The first three of these initiatives were also referred to in the last Autumn Statement (see Pensions Bulletin 2023/47).

In addition, the Pension Schemes Bill will:

• Re-establish the Pensions Ombudsman as a competent court for the purposes of concluding overpayment disputes where recoupment is sought. This follows the 2023 Court of Appeal decision, following which the Ombudsman said that the DWP was supporting legislative changes to formally empower the Ombudsman to bring an outstanding overpayment dispute to an end without the need for a County Court order (see Pensions Bulletin 2024/01).
• Extend the definition of 'terminal illness' in the Pension Protection Fund and the Financial Assistance Scheme to allow eligible members to receive a lump sum payment at an earlier stage. This delivers on a Private Member’s Bill (see Pensions Bulletin 2024/04) that was lost on the dissolution of Parliament.

The Government is to also bring forward a draft Audit Reform and Corporate Governance Bill. This had been promised by the previous Government, but was never delivered. However, it seems that its contents may differ from that promised in the 2022 Queen’s Speech (see Pensions Bulletin 2022/18).

DC scheme returns draw near

The Pensions Regulator has updated its DC scheme return page to reflect the fact that it will shortly be sending out scheme return notices to DC schemes, which must be completed within six weeks of trustees receiving them. This page also highlights the new and updated questions in this year’s return. They are as follows:

• New questions about leavers – schemes will need to provide the number of members who have left the scheme in the 12-month period leading up to the date at which the most recent membership information has been provided. And for schemes with 12 or more members, the asset values that have left the scheme will also need to be provided.
• New questions about the scheme’s pensions dashboard primary contact – including their name, contact details and whether they are a professional or non-professional trustee.
• Updated questions about objectives for investment consultants – which will include when the objectives were set and when they were last reviewed. When the consultant’s performance against their objectives was last reviewed will also be asked. If the objectives or performance against the objectives have not been reviewed, information will be requested as to why this is so.
• Updated questions about benefit details – DC schemes with 12 or more members will be asked questions about benefit details. For some benefit types, the number of members receiving each benefit and the asset value the members received will be asked. Trustees will also need to indicate which members are receiving the benefit for the first time this year and which members have previously received the benefit.

The new and updated questions are also set out other than for those about benefit details.

The scheme return notice will be sent out between August and December 2024. A DC scheme with between 2 and 11 members is required to complete a scheme return every 3 years, whilst those with 12 or more members need to complete a scheme return every year. Scheme returns must be submitted using the Regulator’s online service, Exchange and some tips on how to do so are included. Failure to submit by the deadline stated in the scheme return notice risks the trustees being fined by the Regulator.

BBC case – Court of Appeal upholds High Court ruling

The Court of Appeal has upheld the July 2023 decision of the High Court in British Broadcasting Corporation v BBC Pension Trust Ltd in relation to the limits on a power to make alterations to the BBC Pension Scheme affecting active members (see Pensions Bulletin 2023/31).

The Court of Appeal endorsed the High Court’s ruling that a proviso to the BBC Pension Scheme’s amendment power which prohibited changes affecting the "interests" of active members, should have “interests” interpreted to include:

• Past service rights, including any linkage of those rights to final salary;
• The ability of members to accrue future service benefits under the scheme on the same terms as provided for under the scheme immediately before the amendment; and
• The ability of members to accrue any future service benefits under the scheme.

Inevitably, there was much discussion on the meaning of “interests”, but with the Court determining that it was a 'deliberately simple, broad and open-textured word' that is not tied to '"rights"; still less to rights that have "accrued" or been "secured"'.