7 days

7 Days is a weekly round up of developments in pensions, normally published on Monday afternoons. We collate this information from key industry sources, such as the DWP, HMRC and TPR.

In this 7 Days

• Government announces “Mansion House” reforms
• Finance (No. 2) Act 2023 receives Royal Assent
• TPR publishes blog on delivering value for DC members
• TPR publishes annual report and accounts
• PPF publishes annual report and accounts

Government announces “Mansion House” reforms

The Chancellor, Jeremy Hunt, delivered his Mansion House speech on 10 July 2023, announcing a package of measures to enable the financial services sector to “increase returns for pensioners, improve outcomes for investors and unlock capital for our growth businesses”. He also announced that some of the UK’s largest pension providers have entered into a voluntary agreement to commit 5% of their DC scheme default fund investments to private equity and early-stage business by 2030.

Following the speech, on 11 July 2023, a number of pensions-related consultations opened:

• a DWP consultation on a policy framework to support individuals in DC decumulation
• a DWP consultation on “ending the proliferation of deferred small pots” proposing establishing a system of multiple default consolidators
• a DWP call for evidence on DB scheme surplus, consolidation, asset allocation and incentives around investment strategies, along with a separate response to the DWP’s 2018/19 consultation on consolidation of DB schemes, and
• a joint HMT and DWP call for evidence on pension trustee skills, capability and culture.

These will each close on 5 September 2023.

The following papers were also published:

• a response to the joint January 2023 consultation on a value for money framework, announcing that the parties intend to move forward with their proposals. This will require legislative changes to be carried out “when parliamentary time allows”, and future consultations on draft regulations and FCA rules, and
• a DWP response to the January 2023 consultation on extending opportunities for CDC schemes. The DWP intends to move forward with its proposals, and a consultation on draft regulations to enable unconnected multi-employer CDC schemes is planned for autumn 2023.

The reforms are “welcomed” by TPR as supporting TPR’s “ambition for pension savers to be in large, well-run schemes that deliver good outcomes at every stage of their retirement journey”.

Please see our Alert for more details.

Finance (No. 2) Act 2023 receives Royal Assent

The Finance (No. 2) Act 2023 received Royal Assent on 11 July 2023, bringing into force various pension tax changes announced in the Spring Budget. The changes apply retrospectively from 6 April 2023.

Annual allowance

The AA limits the total tax-relieved pension savings an individual can make each tax year across all registered pension schemes. From 6 April 2023:

• the standard AA increased from £40,000 to £60,000
• the money purchase AA, which applies to any subsequent DC savings by individuals who flexibly access their DC benefits, increased from £4,000 to £10,000
• the minimum tapered AA increased from £4,000 to £10,000, and the threshold at which the taper applies from £240,000 to £260,000. The taper works by reducing the AA by £1 for every £2 of income over the taper threshold. This means that the minimum £10,000 taper will apply to individuals whose income is £360,000 or more.

Lifetime allowance

The LTA limits the total amount of tax-relieved pension savings that an individual can build up over their lifetime across all their registered pension schemes without incurring an additional tax charge. From 6 April 2023:

• the LTA charge is removed
• the maximum PCLS is frozen at £268,275 (being 25% of the 2022/23 LTA)
• certain lump sums (serious ill-health lump sums, LTA excess lump sums, DB lump sum death benefits and uncrystallised funds lump sum death benefits) are taxed at the recipient’s marginal rate.

The intention is to abolish the LTA altogether from 6 April 2024. More details of this are expected later this month, when draft clauses for the next Finance Bill are due to be published.

TPR publishes blog on delivering value for DC members

On 12 July 2023, following the announcement of the Mansion House reforms (see above), TPR published a blog commenting that “in addition to new models” such as DB superfunds and the extension of CDC schemes, a “mindset shift” is needed in certain areas, including a move to a “laser-like focus on value” in DC schemes.

TPR intends to update its DC guidance “soon” to reflect new duties on trustees to report their policy on illiquid investments and to support trustees to make well-informed decisions. TPR also intends to issue new guidance on investing in productive finance and to update its existing investment guidance for DB and DC schemes in the autumn.

TPR publishes annual report and accounts

On 13 July 2023, TPR published its annual report and accounts, giving an overview of TPR’s performance during the 2022/23 business year. While the majority of its key performance indicators were met or almost met, TPR noted that it has not yet published the general code of practice due to “delays in the parliamentary timetable”. No revised timing is given for publication of the code.

PPF publishes annual report and accounts

On 13 July 2023, the PPF published its annual report and accounts for 2022 to 2023. During that period, the PPF’s reserves increased to £12.1 billion and its funding ratio increased to 156%.

The PPF continues to carry out work to implement the Hampshire and Hughes judgments. Payments for 80% of affected members were concluded by December 2022, and payments for the remaining members are expected to conclude in the 2023/24 business year.