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Pensions Insights – July 2023

27 July 2023
In our monthly e-alert, Pensions Insights, we give you our take on the latest highlights in the world of pensions law and policy.

If you have any queries about any of the issues covered, or you require advice on a pensions related matter, please do not hesitate to contact your usual contact.

Case Law

Virgin Media Limited v NTL Pension Trustees II Limited – to be appealed

Further to our report on the case of Virgin Media Limited v NTL Pension Trustees II Limited, Ross Russell Limited, John Jardine in the June edition of Pensions Insights it is understood that permission to appeal the decision has now been granted.

New Law 

Finance (No 2) Act 2023 

The Finance (No 2) Bill 2023 has now received Royal Assent to become the Finance (No 2) Act 2023. The Act includes provisions which:

  • Replace the lifetime allowance charge with an income tax charge at marginal rate for certain payments made by pension schemes on or after 6 April 2023. This is to ensure that payments which would have previously been subjected to the lifetime allowance tax charge are not made tax free, given the abolition of the lifetime allowance charge.
  • Increase the annual allowance to £60,000 with effect on and after 6 April 2023.
  • Increase the money purchase annual allowance to £10,000 with effect on and after 6 April 2023.
  • Increase the adjusted income for the tapered annual allowance to £260,000 and increases to £10,000 the minimum amount to which the annual allowance is reduced on a tapered basis.
  • Disapply certain criteria for those who applied for protection from the lifetime allowance charge prior to 15 March 2023. The ‘loss of protection’ rules are amended for individuals who validly applied for protections from the Lifetime Allowance charge before 15 March 2023. This will allow these individuals to maintain any existing rights to a higher pension commencement lump sum as of 5 April 2023.


TPR Survey - Too many small DC schemes failing to meet expectations on value

TPR has published the results of its recent DC Schemes Survey which it states has highlighted that too many defined contribution (DC) schemes, especially smaller ones, are failing to meet expectations on assessing value.

The survey explored how aware schemes with less than £100 million of assets under management were of requirements to carry out a more prescriptive value-for-members assessment from the first scheme year that ends after 31 December 2021.

Requirement for in-scope schemes not offering value include that the trustees must inform TPR via the scheme return whether they are winding up or transferring the DC rights of their members into another scheme.  If they are not winding up, they must explain why and what improvements they will make to ensure their scheme offers value.

TPR reports that of the 208 schemes surveyed, 64% reported they were unaware of the requirements.

TPR note that the upcoming joint value for money framework will increase transparency and competition in the market, so now is the appropriate time for trustees to evaluate whether they can compete with the best master trusts in offering value for money.

Work and Pensions Committee’s Report on DB pension schemes with liability driven investments (LDI) published

The Report (resulting from economic uncertainty caused by events in September 2022 and subsequent inquiry into that launched in October 2022, calling for evidence) includes a number of recommendations to Government which now has two months to respond.  A consistent theme of the Report is that more systematic, regular and comprehensive collection of data on LDI is needed.

Key recommendations, include that:

  • DWP and TPR should explain how they intend to deliver on the Bank of England’s Financial Policy Committee recommendations that TPR should specify the minimum levels of resilience for LDI arrangements in which pension schemes invest and work with other regulators, to ensure that LDI funds maintain the resilience that has been built up.
  • TPR should consider requiring trustees to report regularly on use of LDI and develop a strategy for engaging more closely with schemes based on the results.
  • DWP should publish its response to consultation on DB consolidation by the end of October and work with TPR to improve the regulation of trustees and standards of governance.
  • Given the time it will take to consult on, legislate for, and implement measures to improve governance, DWP should consider whether the use of LDI could be restricted, for example, based on a test related to a trustee board’s ability to understand and manage the risks involved.
  • The Government should bring forward plans for investment consultants to be brought within the FCA’s regulatory perimeter.
  • In light of the FPC’s recommendation for TPR to take account of financial stability, DWP and TPR should halt their existing plans for a new funding regime, at least until they have produced a full impact assessment for the proposals, including the impact on financial stability and on open DB schemes.

Further Reading