Atkin Pensions & Trustees August Newsletter

TPR Blog – Aim is for ‘fewer, larger, well-run schemes’:   In her latest blog, TPR CEO Nausicaa Delfas welcomes the government’s pension reforms as a path to fewer, better-run schemes. By focusing on sophisticated investment practices, scale, and highly qualified trustees, in DB and DC schemes, the aim is to ensure the best possible retirement outcomes for savers. In the autumn, TPR will provide guidance on investing in productive finance, and will update their existing guidance for DB schemes. This assumes bigger is better but as we all know that is not true, small schemes run by small scheme specialists, fare much better than larger schemes in many areas, particularly member experience and sponsor engagement.  The evidence for bigger being better appears to be built on being able to demonstrate “better” governance (for instance, more detailed ESG reporting) and what, in pound note terms, end up being quite small savings in advisor costs rather than demonstrating that they deliver better member and sponsor outcomes.

Pension Dashboards – Update:  With effect from August 9, 2023, the Pensions Dashboards (Amendment) Regulations 2023 will introduce a single connection deadline for schemes by October 31, 2026. The Pensions Regulator’s guidance has been updated accordingly. Trustees are urged to continue preparations and liaise with administrators for seamless implementation. The staging timetable will be set out in guidance, rather than legislation. Therefore, the timetable will not be mandatory, but Trustees must have regard to the guidance and keep records of how they have complied with it.

Ombudsman hit by ‘Cyber Incident’:   The Pensions Ombudsman recently experienced a cyber incident, temporarily affecting services. Collaborating with security agencies, including the National Cyber Security Centre,  services have been securely restored. While some delays might occur, efforts are ongoing to address recent inquiries and applications.

Removal of Lifetime Allowance – Tax Changes:   The Spring Budget 2023 abolished the LTA from April 6, 2024. The Finance (No. 2) Act 2023 removed the LTA charge and introduced income tax at the individual’s marginal rate. The HMRC and HM Treasury published a consultation on draft Finance Bill 2024 measures to implement the LTA removal. The new tax regime introduces a new ‘lump sum and death benefit allowance’ of £1.073million, and a new ‘lump sum allowance’ of £268,275. Marginal rate income tax will be applied above these limits. Trivial commutation and winding-up lump sums will be assessed against the lump sum allowance. Removal of the LTA will mean that most ‘benefit crystallisation events’ (BCEs) will fall away. BCEs relates to payment of relevant lump sums will remain as they will need to be tested against the new allowances.

Pension scheme winds-up company – Role reversal:   The High Court supported the decision of a corporate trustee to wind up the DB scheme’s sponsors. The Biwater Retirement and Security Scheme, facing substantial deficits, sought winding up due to sponsors’ financial struggles. The corporate trustee had been holding on in the hope that money would come to the scheme, but it became clear that there would be no injection of funds. While considering scheme and PPF drift, the trustee’s decision was upheld by the court, protecting members’ interests.