• IT
Choose your location?
  • Global Global
  • Australian flag Australia
  • French flag France
  • German flag Germany
  • Irish flag Ireland
  • Italian flag Italy
  • Polish flag Poland
  • Qatar flag Qatar
  • Spanish flag Spain
  • UAE flag UAE
  • UK flag UK

Pensions Insights – April 2024

29 April 2024
In our monthly e-alert, Pensions Insights, we give you our take on the latest highlights in the world of pensions law and policy.

Case Law

The King on the application of the British Medical Association v His Majesty's Treasury, Secretary of State for Health and Social Care; The King on the application of the Fire Brigades Union & Others v His Majesty's Treasury, Secretary of State for the Home Department.

As we reported in our March 2023 Pensions Insights, the unions involved in a challenge against the Treasury decision to include the McCloud remedy in the cost cap mechanism ("CCM") sought permission to appeal the High Court decision, which found that the approach taken by the Treasury was not unlawful.

Permission to appeal was granted:

  • against the Judge’s decision that the Directions were not made for an improper purpose in the light of the correct construction of statutory powers;
  • against his decision that the Directions did not discriminate unlawfully against the members of the union on the ground of any relevant protected characteristic; and
  • against the decision that the Respondent did not have an obligation to consult before making the Directions and against his decision that, in making the Directions, the Government did not breach the duty imposed by section 149 of the Equality Act 2010.

The Court of Appeal dismissed the appeals on the basis that:

  1. The Directions were not made for an improper purpose, and it was open to the Treasury to include the McCloud Remedy costs in the CCM as ‘member costs’. This was supported by the facts that none of the relevant pension schemes is or was a funded scheme and therefore contributions of current members are used to pay, not for their benefits, but for the benefits of current pensioners. In addition the McCloud Remedy can be described as  compensation for a civil wrong, but at the same time it is, in substance, the recognition of rights to which those who benefit from it were legally entitled. It follows that it is, or is in the nature of, a member cost; and
  2. It was open to the Judge, on the evidence, to reach the conclusions which he reached about the discrimination claim, and on the claims about consultation and the section 149 duty.

New Law

Abolition of Lifetime Allowance – further regulations expected to be retrospectively effective from 6 April 2024

Following abolition of the Lifetime Allowance on 6 April 2024, HMRC has announced that there will be further minor technical changes. These will be made through a second set of regulations which relate primarily to specific protections or to individuals who plan to transfer their pension savings to a qualifying recognised overseas pension scheme (QROPS).

The regulations, when introduced, will be effective from 6 April 2024. HMRC has noted that schemes should ensure that members are aware of the need for further legislative changes and that affected members may need to wait until the regulations are in place before taking or transferring certain benefits. This is to ensure that their available allowances and tax position do not need to be revisited later in the year.

News

TPR Annual Funding Statement

This includes a reminder that over the summer, TPR will publish a revised defined benefit (DB) funding code, along with supporting documentation and a consultation on updated covenant guidance. It would be good practice for trustees to consider the steps they can take now to align (even if broadly) with the revised DB funding code when it is published, and to avoid having to make significant changes at the next valuation to be compliant.

Key messages from the statement are that:

  • Most schemes have seen material improvements in funding levels. Half of schemes are expected to have exceeded their estimated buy-out funding levels. This step change in position gives trustees and employers an opportunity to reassess their long-term targets and consider run-on, consolidator or insurance options.
  • Where funding levels have improved significantly, trustees should consider whether continuing with the existing strategy and level of risk is in the best financial interests of members. If not, they should aim to redirect some of the funding level improvements towards a funding and investment strategy that is aligned with their future plans for the scheme. Transition options could range from moving to a long-term target with the potential to generate additional surplus to benefit members and employers by running on, to entering into a consolidator or insurance arrangement.
  • A sizable minority of schemes are expected to still be in deficit on a technical provisions basis. Trustees of these schemes will need to continue to focus on achieving a recovery plan that is as short as reasonable, based on the employer’s affordability. They will also need to pay careful attention to the employer covenant, given their higher reliance on it.

Pensions dashboards: the staged timetable

DWP has now issued guidance on the staged timetable for connection to pensions dashboards which sets out a staged timetable for schemes to be connected to the pensions dashboards ecosystem and be in a position to process ‘Find’ and ‘View’ requests.

Guidance issued by the Pensions Dashboards Programme (PDP) will provide further detail on the process of connecting including when to contact the PDP and the onboarding process.

Master trust schemes with 20,000 or more members that provide money purchase benefits only are expected to connect earliest by 30 April 2025.  The smallest in-scope scheme being relevant occupational pension schemes with 100 – 124 members are expected to connect by 30 September 2026.

For trustees or managers of occupational pension schemes that have fewer than 100 relevant members at the reference date which wish to voluntarily connect and bring their scheme into scope further information is expected to be included in the forthcoming guidance published by the PDP. 

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.

Further Reading