Here is a further update on the key measures which came into force on 6 April 2024.
Finessing the abolition of the Lifetime Allowance
For a reminder of the key changes arising from the abolition of the lifetime allowance on 6 April 2024, read our blog here. However, as announced by HMRC newsletter 158, some technical changes are still to be brought into force through further regulations which are due to be made "shortly".
The newsletter also advises that, in the meantime, schemes should make their members aware of the need for further changes as some categories of members may need to wait before taking or transferring their pension benefits to prevent the need for a further review of their tax position later in the year. These include but are not limited to:
- Members with enhanced protection looking to transfer benefits to a new provider;
- Members with enhanced or primary protection or protect lump sum rights looking to take a pension commencement lump sum;
- Members due to receive payment of a lump sum death benefit from funds crystalised before 6 April 2024; and
- Members with scheme-specific lump sum protection looking to take a pension commencement lump sum.
Trustees may want to consider the nature of their scheme and whether it's likely that any of their members are affected by the proposed changes.
Changes to annual allowance calculations in public service schemes
In calculating pension inputs for annual allowance purposes, administrators and trustees of public service pension schemes must now carry across any negative figure from a person's legacy pension scheme to their current (reformed) one if it relates to the same employment. We touched on this in a previous blog post, however, the regulations officially came into force on 6 April 2024 with retrospective effect from 6 April 2023.
Where an individual has pensionable service in both a specified legacy (closed) public service pension scheme and a reformed (open) public service pension scheme for the same employment, and the value of the rights under the legacy arrangement at the end of a pension input period is less than it was at the start, the pension input amount in respect of the reformed arrangement is to be reduced accordingly (but not below zero).
Defined Benefit ("DB") funding regulations – for valuations from 22 September 2024
Regulations are now in force so that for scheme valuations occurring on or after 22 September 2024, trustees will have 15 months from the date of their scheme valuation to set a funding and investment strategy ("FIS") outlining the ways in which they will ensure benefits are provided over the long term. This must specify the ratio of scheme assets to liabilities that they intend to achieve when the scheme reaches significant maturity, and the investments they intend to hold by then.
Once the FIS is determined or revised, trustees must also prepare a statement of strategy for submission to The Pensions Regulator, setting out their long-term funding strategy and their approach to managing risks.
Until then, schemes should continue to meet existing obligations in relation to the statutory funding objective. The Pensions Regulator issued its Annual Funding Statement on 24 April 2024, and schemes with funding valuations between September 2023 and September 2024 in particular should carefully review and consider its impact on their schemes.
We will continue to provide updates as developments arise. In the meantime, 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.
