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Pensions Insights February 2024

26 February 2024
In our monthly update, 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

Amendment terminating final salary link partially effective – Avon Cosmetics Ltd v Dalriada Trustees Ltd [2024] EWHC 34 (Ch).

The proceedings here raised questions as to the validity of one of a number of amendments made to the Avon Cosmetics Pension Plan (the “Plan”). The trust documents governing the Plan contained a power of amendment which was subject to a fetter preventing amendments which, at the date it was made affected prejudicially any pension in payment or any rights accrued/secured up to the date the amendment was made.

The amendments in question effected closure of the Final Pay Section of the Plan, so that benefits in respect of future service were based on Career Average Revalued Earnings (“CARE”) rather than final salary. It was identified that in financial terms, certain members would be better off as a result of the amendments (referred to in the case as the Revaluation Winners) and that others would be worse off (referred to in the case as the FS Winners).

The ultimate question raised by the proceedings was

therefore what the consequence was of the amendment power being exercised in such a way as resulted in a situation that may not have been permitted by the fetter on that power.

It was held that in terms of the effect of the relevant deed of amendment that this was invalid as regards the accrued rights of FS Winners on the basis that they would be prejudicially affected, however this was valid as regards the Revaluation Winners who were not.

New Law

Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024 – in force 6 April 2024

These Regulations set out the legislative detail of a new scheme funding regime designed to protect scheme members for the long-term.

The Regulations will require trustees to put in place long-term strategies that focus on delivering the pensions and other benefits promised to members. The DWP also states that the introduction of clearer funding standards has been designed to enable TPR to intervene more effectively to protect members’ benefits when needed.

The Regulations are expected to come into force from April 2024 applying to scheme valuations from September 2024.

Pensions (Special Rules for End of Life) Bill 2023-24

The Bill aims to extend eligibility for receiving terminal illness payments from the Pension Protection Fund and Financial Assistance Scheme. Clause 1 of the Bill would amend the definition of terminal illness used by both organisations to include people with a life expectancy of up to twelve months – instead of up to six months.


Additional information required for 2024 DB Scheme Return

TPR has published details of further information required to be included in this year's scheme returns for DB and hybrid schemes, including:

  • Information about fiduciary managers, including contact details, when they were appointed and whether they were appointed using a competitive tender process.
  • Information about investment consultancy providers, including contact details, when they were appointed and when strategic objectives were set and will be reviewed.
  • Details of liquidity and leverage and controls in place.
  • Details of the primary contact with regards to pensions dashboard duties including name, contact details and whether they are a professional/non-professional trustee.
  • Details of companies which administer AVCs including names and how many members each AVC provider looks after.

In relation to information required re asset breakdown the help text has been updated to add further clarity on:

  • how to allocate private debt and inflation-linked bonds; and
  • the signs (positive or negative) of the various exposures and corresponding risk factor stress impact.

The deadline for completing and submitting the scheme return is 31 March 2024.

TPR publishes guidance on private markets investment

The guidance is intended to make clear that with the right advice and effective governance, private market assets can play a valuable part in a diversified portfolio that aims to improve and protect saver benefits.

TPR’s guidance follows on from the Government’s Mansion House reforms, which are designed to enable the financial services sector to unlock capital for UK industries and increase returns for savers while supporting growth across the wider economy.

The guidance calls on trustees to ensure they have an appropriate level of knowledge and understanding to be able to work with their advisers to fully consider how accessing private market assets may meet their needs. This includes setting objectives for their investment advisers relating to private market investment advice and improving outcomes for members.

Other DWF Publications

InsureInsight: Insurance Sector Trends 2024

As 2024 dawns on the insurance industry with a sense of both opportunity and challenge, we delve into the key trends shaping the sector, analysing the forces driving change.

Click here for more information and to access our report which includes Compliance and opportunity: What Defined Contribution Pensions changes mean for providers.

Further Reading