Issues affecting all schemes
Autumn Budget 2024 – pensions-related announcements
The Autumn Budget contained the following key announcements affecting occupational pension schemes:
- Taxation of death benefits – From 6 April 2027, the majority of death benefits paid from registered pension schemes (whether DB or DC) will form part of the deceased member’s estate for inheritance tax (IHT) purposes. This includes lump sums which are currently outside IHT because they are paid to a beneficiary chosen by trustees using their discretion. The main exception will be a dependant’s scheme pension (i.e. pensions paid to a dependant such as a spouse or child). Schemes will be responsible for reporting and paying any IHT due. The government is consulting on the proposals until 22 January 2025.
- Overseas transfers – From 30 October 2024, the exclusion from the overseas transfer charge (OTC) for transfers to qualifying recognised overseas pension schemes in the EEA or Gibraltar will be removed.
- Scheme administrators – From 6 April 2026, scheme administrators (for tax purposes) of registered pension schemes will be required to be UK resident.
HMRC has published guidance summarising the changes. For more information on the Budget, please see our legal update.
Action
Trustees and administrators should ensure that their transfer processes are updated to reflect the removal of the OTC exemption. Trustees should also check whether their scheme administrator for tax purposes is UK resident.
Action
Trustees and employers should monitor the outcome of the consultation on the IHT changes.
Abolition of the lifetime allowance – clarificatory changes
Regulations will come into force on 18 November 2024 that make a range of clarificatory changes to the legislation governing the abolition of the lifetime allowance and the new lump sum regime. The changes include:
- Introduction of a requirement for individuals who obtain a transitional tax-free amount certificate (TTFAC) to send a copy to every other registered pension scheme of which they are a member. Where a TTFAC is cancelled, individuals must likewise send a copy of the cancellation notice to all registered pension schemes of which they are a member.
- Introduction of a penalty where a TTFAC is not issued within the required timeframe.
- Expansion of the information that must be provided by a scheme to a member’s personal representatives on the member’s death.
- Correction of the calculation of pension commencement lump sums for individuals with scheme-specific lump sum protection.
- Correction of the calculation of a member’s crystallised pension rights for the purposes of determining their eligibility to receive a trivial commutation lump sum.
HMRC has published guidance summarising the changes. The regulations will have effect from the 2024/25 tax year.
Action
Trustees and administrators should ensure that their administration processes are updated to reflect the changes.
Pensions scams – video campaign
The Pensions Regulator (TPR) has launched a video campaign to combat pension scams. The campaign comprises two videos, one aimed at schemes, and one aimed at members. The videos are based on the experience of a victim of a pensions scam. TPR is urging schemes to share the member video with their members to help them understand how to spot and avoid scams. The video has been created in three different lengths (six minutes, two minutes, and 30 seconds).
Action
Trustees should watch the trustee version of the video and consider circulating the member version to members.
Data protection – new legislation
The Data (Use and Access) Bill has been laid before Parliament. It makes changes to the data protection regime in the UK, including in relation to the concept of legitimate interests and international data transfers.
Action
Trustees, employers and administrators should monitor the Bill’s progress through Parliament.
Cyber security – communications
The UK National Cyber Security Centre has published guidance on effective communications in a cyber incident. The guidance outlines the importance of effective communication to staff, stakeholders, customers, and the media in a cyber incident and outlines three core principles:
- Prepare a communications strategy in advance.
- Communicate clearly with different parties, and tailor messaging where necessary.
- Manage the aftermath in the medium to long term.
For more information, please see our legal update.
Action
No action required, but trustees may find the guidance helpful when planning their response to, and when responding to, a cyber incident.
Pensions dashboards – industry guidance
The Pensions Administration Standards Association has launched a Dashboards Toolkit. The Toolkit will be updated over time and currently includes:
- A questionnaire for trustees to issue to their AVC providers in advance of connecting their scheme AVCs to dashboards.
- A checklist and suggested list of activities for administrators to connect to and maintain AVC data.
- A list of AVC providers and their connection methods.
The Pensions Dashboards Programme (PDP) has also published FAQs on the guidance it has produced to support schemes in connecting to the dashboards ecosystem. The FAQs cover:
- Who the guidance is for.
- The step-by-step connection journey.
- Roles and responsibilities.
- Vouching scheme requirements and responsibilities.
- Conducting an IT Health Check or penetration test.
- The PDP’s plans for future guidance.
In addition, the government has announced that the PDP has concluded the formal reset process that required the implementation of dashboards to be delayed and is now testing the connection journey with a small number of external organisations. The government has also directed the PDP to launch the MoneyHelper non-commercial dashboard service before connecting commercial dashboard services. The PDP has published FAQs on the announcement.
Action
No action required, but trustees and administrators of schemes that are subject to the dashboards duties may find the Toolkit and FAQs helpful.
ESG – TPR resources
TPR has called on trustees to access a new suite of essential resources which will help them build their knowledge and understanding and embed ESG decision-making into every area of scheme governance and stewardship. While TPR’s research shows the vast majority of trustees are meeting their ESG duties, TPR wants trustees to go beyond minimum compliance and seek continuous improvement.
Through its Market Oversight directorate, TPR will look more broadly at investment governance practice and decision-making, including around ESG. It will constructively challenge trustees’ decision-making so it can be assured members’ interests are being met. However, while TPR wants ESG and climate change to be embedded into scheme decision-making, it also wants trustees to be able to easily find the support they need to do that. To help them find the material they need, TPR has brought all its ESG and climate material into one place.
Action
No action required, but trustees may find the resources helpful in complying with their ESG-related duties.
TPR – risk-based regulation
TPR has published a blog post on what its move to “risk-based regulation” means for the industry and members. TPR believes that to ensure all members get good outcomes from pensions (whether DB or DC), it needs to change the way it works as a regulator and address key risks wherever they arise and that to do that it must foster greater collaboration and innovation with the industry. The post gives more information on two new regulatory approaches that TPR is adopting in this vein:
- Engaging with professional trustee firms – TPR will be engaging with the 10 largest professional trustee firms. It wants to understand good practice but also to identify risks in areas such as ownership structure, skills and experience, diversity, equality and inclusion, conflicts of interests, and fees.
- Embracing innovation and providing schemes with certainty – TPR believes that the industry needs to innovate in members’ interests. However, it acknowledges that when designing new models and approaches, it is challenging for the industry to understand whether ideas meet TPR’s expectations, and if they might breach regulations. TPR is therefore launching an innovation hub to review industry ideas at an early stage and to provide guidance on the approach TPR would likely take to that innovation.
Action
No action required.
TPR – data and technology
TPR has published its digital, data and technology strategy which sets out how TPR and the industry should adapt to, and embrace, changing technology and a changing pensions market to drive better member outcomes. The strategy aims to:
- Reduce unnecessary burden on pension schemes.
- Enable effective market competition.
- Help TPR innovate and create an environment which encourages pension schemes to do the same in members’ interests.
Action
No action required.
Investment – British Growth Partnership
The government has announced the launch of a new British Growth Partnership as part of the British Business Bank (BBB). The Partnership will create a new way for the BBB and institutional investors, in particular pension schemes, to invest in high growth and innovative companies together. These long-term investments will be made independently of the government on a fully commercial basis. Over the next year, the BBB will seek to raise hundreds of millions of pounds of investment for this fund, with the aim of making investments by the end of 2025.
Action
No action required.
Pensions Ombudsman – Resolution Team
The Pensions Ombudsman has published a factsheet on its Resolution Team. The factsheet explains:
- The role of the Resolution Team.
- When a complaint will be looked at by the Resolution Team.
- What happens in the Resolution process.
- What happens if the respondent has done something wrong.
- What happens if the respondent has not done anything wrong.
- What happens after a resolution is reached.
- What happens if a complaint progresses to the Adjudication Team.
Action
No action required.
Issues affecting DB schemes
Surplus payments – tax charge
There is currently debate within the industry about whether the authorised surplus payment charge (reduced from 35% to 25% with effect from 6 April 2024) is payable on the gross amount of the surplus payment or the net amount actually received by the employer. HMRC has announced that its view is that the charge is due on the gross amount and that it will be updating its guidance to clarify this.
Action
Trustees and employers of DB schemes should monitor any further developments in this area.
Issues affecting DC schemes
CDC schemes – extension of regime
The government is consulting on draft legislation to extend the collective DC (CDC) regime to unconnected multiple employer schemes. The draft legislation removes the exclusion of unconnected multiple employer schemes from the regime and sets out what unconnected multiple employer schemes must do to become authorised and to operate effectively under regulatory oversight, and what happens if changes need to be made to those schemes. The draft regulations also make various consequential changes to legislation arising from the expansion of the CDC regime. The consultation closes on 19 November 2024.
Action
Employers who are interested in establishing a CDC scheme should monitor the outcome of the consultation.
Mayer Brown news
Upcoming events
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11 December 2024 - Trustee Building Blocks Classes
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27 November 2024 – Moving to buy-in: what trustees should (and shouldn’t) do
Mayer Brown updates
Jay and Andrew are delighted that Tom MacAulay and George Belcher have joined Mayer Brown as partners in the firm’s Corporate & Securities practice and Global Insurance Industry Group. Tom has wide-ranging experience in the life and annuity business (re)insurance space, covering bulk purchase annuities, the development of alternative de-risking solutions and reinsurance transactions, while George has a broad based practice with life & annuity and non-life experience. Their arrival at Mayer Brown further strengthens our ability to advice trustees, employers and insurers on bulk annuity, longevity de-risking and reinsurance transactions.
Mayer Brown Insights
- Communications in a cyber incident – guidance | Insights | Mayer Brown
- Autumn Budget 2024 – pensions-related announcements | Insights | Mayer Brown
- Pensions and the Autumn Budget – what’s changing? | Insights | Mayer Brown
All our Insights are available here.
