New Funding Regime – Delayed: In an appearance before the Work & Pensions Committee, pensions minister Laura Trott noted that the government would wait for recommendations of the Work & Pensions Committee, and House of Lords’ Industry & Regulators Committee before finalising the proposed funding code regulations. The Parliamentary committees have been investigating pension schemes and LDI funds, following the market turmoil last year. The new funding code was expected to be in place from October this year, but it now seems that this has been pushed back to at least April 2024.
LDI – BoE recommends ‘minimum resilience’: The Financial Policy Committee of the Bank of England has recommended that TPR mitigates financial stability risks by specifying minimum levels of resilience for the LDI funds used by DB schemes. The FPC said that LDI funds should be resilient to yield shocks of 250 basis points. Many LDI funds and managers have already adjusted their funds to be much more robust. Guidance is expected from TPR later this year.
Lifetime Allowance – HMRC Guidance: In its latest Newsletter, HMRC provides guidance following the announcement in the Spring Budget that the LTA charge would be removed from 6th April 2023, in advance of the plan to abolish the LTA from 2024. HMRC note that pension scheme administrators will need to continue to operate checks when paying benefits. However, no LTA charge will arise and there will be no requirement to report LTA charges to HMRC. Certain lump-sum payments that would have led to an LTA charge at 55% will now be subject to income tax at the recipient’s marginal rate. The newsletter is here: HMRC LTA Guidance
Life expectancy – Assumptions fall: The Continuous Mortality Investigation has confirmed it will go ahead with its proposals which will see a 25% weighting given to 2022 mortality data in the forthcoming CMI_2022 model. Increased weighting will be given to mortality data in subsequent years. All else being equal, schemes adopting the new core model will see life-expectancy assumptions fall by around 6 months.
Small DC Scheme – Value for Money: Since 2021, DC schemes with assets of less than £100million were required to comply with ‘value for members’ (VFM) regulations on an annual basis. Schemes that failed to offer value were then either expected to improve, or wind-up. TPR will be conducting a review to ensure compliance and will be contacting trustees of a number of schemes in the near future.
PPF Levy – Deadline for certifying contributions: The deadline for certifying ‘deficit reduction contributions’ so that they are considered for the 2023/24 PPF levy is 5pm on 28th April. Trustees and their advisers should review whether a certification exercise will be worthwhile and submit the relevant certificate.
TPR General Code: TPR intends to publish its consolidated single code of practice shortly with it being called the General Code. The Code will consolidate a number of the existing codes of practice and will require schemes to establish an ‘effective system of governance’ (ESOG) which is proportionate to the size, nature, scale, and complexity of the scheme. Schemes with 100 members or more will be required to carry out an ‘own risk assessment’ (ORA) within 12 months of the last day of the first scheme year that begins after TPR has issued the new Code. Schemes with 100 or more members will also have to have written policies on matters such as remuneration, appointment of advisers, climate change, and cyber-security.
State Pension Age – Rise to 68 in question: Whilst the rise of the SPA to 67 will take place between 2026-28, the rise to 68 (scheduled to happen between 2037 and 2039) has been put on hold pending a further review following the next General Election. The slowing of the rate of life-expectancy improvement in recent years, resulting in a fall in projected life expectancy is behind the decision.
