This year is anticipated to be a busy year for pensions, following what the government described as a "comprehensive package of pension reform" announced in the Chancellor's 2023 Autumn Statement back in November, and the Pension's Regulator launching their long awaited General Code of Practice early this year.
In this insight article we discuss some of the key items coming for trustees, pension providers and their advisers.
Autumn Statement and Mansion House Reforms
A number of pensions related consultations and measures were announced in the Autumn Statement and are expected in 2024, signalling the next stage in the implementation of the Mansion House reforms announced in July 2023.
- DB schemes – anticipated government consultations on how the Pension Protection Fund (PPF) could act as a public consolidator for DB schemes not currently served by the market; and on potential changes to rules relating to when a DB scheme surplus may be repaid and the possibility of 100% PPF coverage for those DB schemes who choose to pay a higher levy. In addition, the tax charge on authorised surplus payments will be reduced from 35% to 25% from 6 April 2024.
- Value for Money Framework - the Financial Conduct Authority (FCA) will launch a consultation on the rules for the new framework, where schemes will be required to make comparisons against the wider market, driven by the idea that large schemes may reduce costs for pension savers.
- Small Pots - the government has followed up on its consultation on ending the proliferation of small pots, confirming it will introduce a multiple default consolidator model to consolidate eligible pension pots under £1,000.
- Lifetime Provider Model - anticipated government response to the call for evidence which closed on 24 January 2024, which would permit individuals who have moved employers to receive contributions into their existing pension scheme rather than accumulate a new pot for each employment move, resulting in a "pot for life".
- Master Trust Review - DWP may be considering legislative amendments following the publication of a review of the master trusts market, including a description of the ways the Pensions Regulator plans to enhance its supervision of master trust investment governance and strategies ahead of a legislative framework.
- Lifetime Allowance (LTA) - confirmation of the abolition of the LTA with effect from 6 April 2024, as legislated in the Autumn Finance bill 2023.
- Decumulation – an anticipated consultation on plans to introduce duties on defined contribution (DC) scheme trustees to offer decumulation services and products in response to the government's consultation on the proposed framework, with interim guidance to be issued jointly with the Pension Regulator in early 2024.
- Trustee Skill and Capability – a response was issued to the government's call for evidence on pension trustee skills, capability and culture, acknowledging that some trustees may benefit from additional support, guidance and training and confirmation of the immediate actions to address issues raised in the call for evidence.
Automatic Enrolment Regulations
With new powers for the Secretary of State for Work and Pensions to enact regulations that lower the minimum age for eligible workers to be automatically enrolled into a pension scheme, and/or reduce or remove the lower earnings threshold, we can likely expect consultation on the changes in due course.
Transfer Regulations
Last year, the Department for Work and Pensions (DWP) issued a report on the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 following recommendations from the industry that the legislation is insufficiently clear in key areas such as the overseas investment amber flag and the incentives red flag. The DWP has announced an intention to work with the industry to consider changes to the legislation to improve the transfer experience whilst keeping the intent of the legislation.
Pensions Dashboards
The pensions industry continues to work towards the new connection deadline of 31 October 2026, and further guidance from the DWP is anticipated including on the staging profile for schemes to connect to the dashboards ecosystem.
Notifiable Events framework
And finally, could 2024 be the year we see the updated notifiable events framework? The draft Pensions Regulator (Notifiable Events) (Amendment) Regulations 2021 were expected to enter into force on 6 April 2022 however with no mention of the legislation in the Autumn Statement or King's Speech, it is uncertain when (or if) the changes to the framework will be enacted.
This is not a comprehensive list, but even so 2024 is shaping up to be another very busy year for the pensions industry! We will of course continue to provide updates as the various initiatives progress. If you would like to discuss anything raised in this blog in more detail, please get in touch with a member of the pensions team or your usual Brodies contact.
