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

Spring Budget 2023 – pensions tax changes

This year’s Spring Budget on 15 March 2023 saw announcements that:

  • the lifetime allowance (“LTA”) charge will be removed from 6 April 2023, and the LTA will be abolished altogether from April 2024
  • the annual allowance (“AA”) (which limits the total tax-relieved pension savings an individual can make each tax year) will be increased from £40,000 to £60,000 from 6 April 2023
  • the money purchase AA (which applies to individuals who have flexibly accessed their DC benefits), and the minimum tapered AA, will each increase from £4,000 to £10,000, from 6 April 2023. The income threshold at which the taper applies will rise to £260,000 (up from £240,000)
  • the maximum pension commencement lump sum (“PCLS”) will be retained, staying at its current level of £268,275 (25% of the current LTA) and will be “frozen thereafter”, except where protections apply.

See our Alert for more details.

On 16 March 2023, HMRC published a newsletter containing some helpful comments in connection with the proposed tax changes. It confirms that:

  • although the LTA charge will cease to apply from 6 April 2023, the LTA framework will remain in place after that date, so administrators will need to continue to operate LTA checks when paying benefits and to issue benefit crystallisation event statements
  • members with valid enhanced protection, or fixed protections applied for before 15 March 2023, will be able to accrue new pension benefits, join new arrangements, or transfer their benefits from 6 April 2023 “without losing this protection”. They will also keep their entitlement to a higher PCLS.

However, it will be some time before the legislation removing the LTA, and addressing the consequential effects of that, is published, so we suggest trustees and employers recommend that members seek financial advice before taking actions which may cause them to lose any valuable LTA protections.

PDP publishes Q&A and TPR updates guidance on pensions dashboards

On 15 March 2023, PDP published a set of FAQs on the DWP’s recent statement postponing connection deadlines for pension schemes (see 7 Days). The PDP expects schemes to continue with their dashboard preparations.

TPR has updated its dashboards guidance to reflect the DWP’s announcement. TPR has also updated its checklist to help schemes continue preparing for pensions dashboards.

TPR publishes new guidance on employer-related investments (“ERI”)

TPR published new guidance on ERI on 14 March 2023. Although the legal position on ERI has not changed, the guidance reminds trustees and employers of the “restrictions on using pension scheme funds” for ERI, and the risk of criminal prosecution for breach of the restrictions.

WPC launches inquiry on the future of DB pension schemes

On 16 March 2023, the WPC launched an inquiry into DB pension schemes and the “challenges and opportunities” they pose to members, trustees, employers and TPR. It will review the regulatory framework for private sector DB schemes, and the ways DB schemes can be consolidated and bought out.

As part of the inquiry, the WPC is calling for evidence on questions including what, if any, further steps should be taken to encourage DB scheme consolidation, and how scheme surpluses should be treated. The call for evidence closes on 26 April 2023.

Pensions Minister confirms consultation on expanding automatic enrolment (“AE”)

Speaking at the Committee Stage of the Private Member’s Bill to extend AE (see 7 Days), Laura Trott has confirmed that the Government hopes to consult on the implementation approach and timetable for expanding AE “in the autumn” this year.