The Budget – Lifetime Allowance frozen: In the March Budget, it was announced that the Lifetime Allowance will be frozen until at least 6th April 2026. Anybody who was close to the original limit, or expected to exceed it will need to review their plans. It also may lead some to wonder whether this is the first tentative step at a wider reform of pension taxation which might, ultimately, result in the reduction of tax relief on contributions and removal or reduction of tax-free cash.
The Budget – Corporation tax and pension contributions: Corporation tax will be increased from 19% to 25% from April 2023 for companies with profits over £250,000. Companies that will pay higher tax, can expect to get an increase in the tax-relief for employer contributions and, therefore, may prefer for contributions to start/increase when the tax-relief will be higher.
Pension Scheme Act 2021 – New criminal offences: Two new criminal offences (avoidance of employer debt and conduct risking accrued benefits), with punishments of up to seven years in prison, were created by the Act. TPR has issued a draft policy on its approach to the investigation and prosecution of the new offences and will be consulting on this. Trustees should make sure that they understand how these offences work.
Pension Dashboards – Get ready: In preparation for the advent of Pension Dashboards, guidance on reviewing data has been issued by the Pensions Administration Standards Association (PASA). The guidance includes a useful one-page primer which Trustees may want to discuss with their advisors.
Increase in government borrowing: The Government is spending heavily to get through the Covid-19 crisis and, as a result, gilt sales for 2021/22 are expected to be high. Gilt yields have increased since the start of the year and so those schemes that are not fully hedged may have seen a boost to their funding position. Meanwhile those with hedging may want to confirm with their advisors whether this had any impact on either the level of hedging or the collateral arrangements.
General Levy – Increase announced: The general levy (as opposed to the risk based levy) for DB schemes will increase by 10% in 2021/22 so Trustees can expect increased levy invoices when they are issued later in the year. Certification of deficit reduction contributions: The deadline for certifying deficit reduction contributions is 30th April. Schemes with less than £50m in liabilities may want to consider the impact of the small scheme adjustment when assessing whether certification will result in an actual saving once costs are taken into account.