7 days

7 Days is a weekly round up of developments in pensions, normally published on Monday afternoons. We collate this information from key industry sources, such as the DWP, HMRC and TPR.

In this 7 Days

TPR’s new general code comes into force

The new general code of practice came into force on 28 March 2024. It replaces 10 existing codes, which were revoked on the same date. See our Alert for more details.

TPR has updated its guidance on assessing whether to report a breach of pensions law, alongside minor updates to various pieces of DC scheme guidance to align it with the new code, including administration and communicating with DC scheme members (formerly “communicating and reporting”).

Pensions dashboards updates

The DWP published its Pensions dashboards: guidance on connection on 25 March 2024. This sets out a phased timetable for schemes to connect to the pensions dashboards ecosystem and be ready to respond to “find” and “view” requests. The timetable runs from 30 April 2025 for schemes with the largest memberships, to 30 September 2026 for the smallest schemes.

The guidance is not mandatory but trustees must “have regard to it”, ie they must take it into account in any decision making, and be able to demonstrate how they have done this. All schemes must connect by the statutory deadline of 31 October 2026.

See our Alert for further detail on the new guidance.

The FCA has published a further consultation on the regulatory framework for firms operating a pensions dashboard service. This consultation seeks views on new guidance to help firms understand the scope of this regulated activity, as well as a small number of changes to the FCA’s 2022 proposals. The consultation closes on 8 May 2024.

HMRC publishes latest guidance on LTA removal and begins updating PTM

On 28 March 2024, HMRC published pension schemes newsletter 157, which includes a section with FAQs on the removal of the LTA from 6 April 2024. The FAQs cover topics including changes to the conditions for payment of an UFPLS, the new pension commencement excess lump sum, reporting requirements and transitional tax-free amount certificates.

Importantly, the newsletter confirms that changes will be brought forward through regulations to provide that individuals with enhanced protection will be able to retain their tax-free entitlement to certain benefits if they transfer to a new arrangement (see our Alert for details of this issue).

HMRC has also begun to update its pensions tax manual to reflect the tax changes. A list of updated pages is available here.

WPC issues report on DB pension schemes

On 26 March 2024, the WPC published its report on its inquiry into private sector DB schemes. The report concludes that, despite a steady decline in number in recent years, DB schemes are “still of critical importance to both savers and the UK economy”. It calls for a “fresh approach” to funding regulation and the treatment of surpluses, with recommendations including:

  • the DWP and TPR should work with open schemes to address remaining concerns that such schemes could be forced to de-risk unnecessarily, potentially leading to premature closure, before the revised DB funding code is laid before Parliament. This follows the DWP’s changes to the new DB funding regulations to introduce additional flexibility for open schemes, in response to consultation feedback received
  • TPR’s objective to protect the PPF should be replaced with a new duty to protect future service benefits, as well as accrued benefits
  • the Government should consult on detailed proposals for DB superfunds legislation and introduce primary legislation for superfunds as soon as possible, with the aim of supporting consolidation to improve governance
  • the Government should find an early legislative opportunity to give the PPF more flexibility in how it sets its levy, allowing it to reduce to zero and increase again if necessary (see our Alert for more background)
  • TPR should consider requiring schemes to set out why they have pursued a particular end-game approach and why it is in the best interests of scheme members.

The Government’s response to the report is due by 26 May 2024.

Updates on TPR’s progress in relation to the LDI crisis and financial stability

On 27 March 2024, TPR published a letter dated 25 January 2024 updating the Bank of England’s Financial Policy Committee (“FPC”) on its progress and actions in relation to LDI and financial stability. TPR also published a press release welcoming a report by the FPC giving an update on the resilience of LDI funds following volatility seen in September 2022.

TPR’s work to date includes publishing LDI guidance, increasing the number of its investment consultants and the recruitment of a senior economist to “better gather market intelligence”. TPR considers that schemes are now more resilient to shocks.

TPR gives details of recent case using its anti-avoidance powers

On 27 March 2024, TPR published a regulatory intervention report setting out how a settlement was reached after TPR issued a warning notice seeking financial support directions against six companies. The intervention was based on evidence that assets had been transferred out of a scheme employer to its wider corporate group, and resulted in £3.52 million being paid into the scheme. TPR commented that its anti-avoidance powers may be engaged where “proper mitigations” have not been considered for pension schemes.

TPR publishes tips for trustees looking to improve their scheme’s EDI standards

In a blog published on 26 March 2024 discussing TPR’s EDI strategy and disclosures, TPR set out three tips for trustees looking to improve their scheme’s standards:

  • look to the wider pensions industry to take advantage of good practice. For example, scheme sponsors may have policies that schemes could consider adopting where relevant
  • engage with TPR’s EDI guidance, including thinking about diversity more widely than just through more visible characteristics
  • recognise the “value everyone plays in driving this agenda”.

Trustees are encouraged to create an EDI strategy or action plan for their scheme.

TPR announces interim leadership changes

In line with its organisational restructure, TPR has appointed Neil Bull as Interim Director of Market Oversight, Nina Blackett as Interim Director of Strategy, Policy and Analysis and Mel Charles as Interim Director of Regulatory Compliance.

Louise Davey continues to be a member of TPR’s Executive Team and leads the interim Regulatory Advice and Analysis directorate.

PPF consultation on valuation assumptions for small schemes

The PPF is consulting on changes to “section 143” valuation assumptions for smaller DB schemes. It proposes allowing actuaries to use bespoke discount rates in section 143 valuations for schemes with liabilities of less than around £50 million. The proposals follow feedback that “marginally overfunded” small schemes can struggle to receive affordable buy-out quotes after a PPF assessment period, and “usually run-on as closed schemes before re-entering the PPF”. The changes are intended to avoid understating small scheme liabilities, therefore helping to prevent schemes incurring the administrative costs of running on before re-entering the PPF.

The consultation closes on 6 May 2024. If introduced, the changes would take effect for valuations on or after 31 May 2024.