Pensions Bulletin 2025/02
Pensions & benefits Policy & regulationIn this edition: Emma Reynolds moves to the Treasury, Pension Fund clearing exemption to be made permanent and Pensions Regulator updates its pension scams leaflet.
Emma Reynolds moves to the Treasury
Pensions Minister Emma Reynolds has become Economic Secretary to the Treasury following the resignation of Tulip Siddiq on 14 January 2025. Torsten Bell succeeds Emma Reynolds in the pensions brief that newly spanned both the Department for Work and Pensions and HM Treasury when she was appointed in July 2024 (see Pensions Bulletin 2024/26).
Pension Fund clearing exemption to be made permanent
The Government has decided that the current exemption that pension funds have from the obligation to clear certain derivatives contracts at a central counterparty should be maintained for the longer-term. This follows a Call for Evidence on the topic launched in November 2023 (see Pensions Bulletin 2023/45). As a result, the Government will now make regulations to ensure that the current exemption does not expire on 18 June 2025 as currently scheduled and to remove any further time limit on the exemption. However, the Government will keep this exemption policy under review in coordination with the UK regulatory authorities.
The response to the Call for Evidence, published on 10 January 2025, also sets out a number of disadvantages of requiring pension funds to clear certain derivative contracts. In particular, the increase in cash holdings and reduced investment returns that would likely result from an expiry of the exemption and the increased liquidity pressures that would be placed on schemes. The response also notes that removing the exemption could reduce pension schemes’ ability to invest in productive assets.
By way of background, the clearance obligation had been legislated for by the European Union in 2012 by means of the “EMIR” Regulation which contained a temporary exemption for pension schemes. The EU repeatedly extended this exemption up to and beyond the UK leaving the EU. The UK made the Regulation part of EU assimilated law in the UK post-EU exit and also continued to roll back implementation, most recently by means of regulations that pushed back implementation from 18 June 2023 to 18 June 2025.
Comment
This news will be welcomed by DB pension schemes and those that advise them. The issue has existed for a long time and has now been satisfactorily concluded. The exemption provides helpful flexibility and it is good that we now have clarity that it will remain over the longer term.
Pensions Regulator updates its pension scams leaflet
The Pensions Regulator updated its pension scams leaflet in December, but as it seemed to do so with little or any publicity the matter has only now come to light. Available via its “Warn members about pension scams” webpage, this two-page leaflet sets out the same four steps for individuals to go through if they suspect they are being scammed as had been previously promoted, but now comes branded from the Pension Scams Action Group – a body co-ordinated by the Pensions Regulator.
Comment
Scheme administrators should note this development and ensure that they include the updated leaflet in relevant communications with scheme members.
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