Current Issues January 2025

TPR– Covenant guidance:  The Pensions Regulator has issued updated covenant guidance for trustees managing DB scheme valuations and employer covenant monitoring. The guidance, comprising nine sections, introduces terms like “reliability period” (certainty of employer cashflow) and “covenant longevity” (expected employer support duration). It completes the new DB funding regime. The guidance can be found here: Covenant guidance | The Pensions Regulator

Virgin Media Case – Update:  The Association of Consulting Actuaries (ACA) is in talks with the DWP to address the impact of the Virgin Media v NTL Pension Trustees II ruling, which invalidates amendments to contracted-out schemes lacking written actuarial confirmation (a ‘S37 certificate’) of compliance with the Reference Scheme test. As mentioned in past newsletters, this may lead to complex rectification and higher liabilities for affected schemes and causes great uncertainty.  We hope for a DWP update soon, potentially offering retrospective validation to mitigate this issue.

PPF Levy – More options considered:  The Pension Protection Fund announced on 12 December that its decision on the 2025/26 levy will be finalised in January 2025. Following its September consultation, which proposed maintaining the levy at £100m, the PPF is exploring options to reduce it further. The PPF has said that it aims to charge the levy only as long as necessary.  The levy of £100m was only being maintained as the PPF cannot raise the levy by more than 25% each year and it was concerned that it would be unable to meet demands if market events caused a need to raise funds.  Many in the industry had noted that the PPF does not need the cash and that the DWP and PPF should look to change the rules, rather than charging schemes when it is unnecessary.

UK Pension Review – On hold:  The UK Government’s landmark pension review, launched in July 2024, faces uncertainty as recent media reports suggest the second phase has been “delayed indefinitely” due to the Chancellor’s concerns about business costs. A Government spokesman stated that details will be provided “in due course.” This phase, aimed at improving pension outcomes and boosting UK investment, was expected to address retirement adequacy, auto-enrolment reforms, and contribution rates, but these now risk significant delays amidst rising employer NICs from April 2025.  Reports suggest that the Government is concerned about adding further to employer costs.

HMRC – Online reporting:  Trustees will be aware of HMRC introducing the ‘Managing Pension Schemes’ platform to replace ‘Pension Schemes Online’ and that there has been a gradual transition of reporting requirements from one platform to the other.    HMRC has reminded trustees that Event Reports for the 2023/24 tax year can only be submitted through Managing Pension Schemes.  It has also confirmed that any pension scheme being asked to submit a Pension Scheme Return for the 2024/25 tax year onwards can only do this through Managing Pension Schemes.  Up to now, Scheme Returns had to be submitted on Pension Schemes Online.

Pension Scheme Accounts – A request for simplification:  The Pensions Research Accountants Group (PRAG), backed by members of the Joint Industry Forum on Workplace Pensions, has urged the Government to amend regulations on pension scheme annual reports. In a letter to the DWP, they argue current requirements make reports overly lengthy, costly, and delayed, proposing non-core content be moved online with references in the reports instead.