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

• Autumn Statement 2023 – pensions reforms
• TPR and FCA statements on the VFM framework
• Government responds to WPC inquiry on DB schemes with LDI
• PLSA publishes case studies on investment in illiquid assets

Autumn Statement 2023 – pensions reforms

The Chancellor, Jeremy Hunt, delivered the Autumn Statement on 22 November 2023. Among other measures, the announcements included a “comprehensive package of pension reform” representing the next steps of the Chancellor’s Mansion House reforms, including:

• plans to enable a small number of authorised schemes to act as consolidators for eligible small deferred DC pension pots of £1,000 or less will go ahead, and a call for evidence has been launched to explore whether allowing individuals to have a “pot for life” would simplify the DC pensions market
• the Government intends to introduce a duty on DC occupational scheme trustees to offer decumulation services and products to members “at the earliest opportunity”
• following the call for evidence on DB options, a consultation looking at changes to the rules around repaying DB surplus to employers, and opening up the PPF to act as a consolidator for smaller DB schemes that are “unattractive to commercial providers”, is expected in the “winter”
• in response to feedback to the call for evidence on trustee skills, capability and culture, TPR will establish a trustee register, and the Government will “strongly encourage” professional trustee accreditation. This will be identified as an expectation in TPR’s forthcoming new general code.

Following the pensions tax changes announced at the Spring Budget, HMRC has issued a policy paper detailing how the pensions tax system will work following the LTA’s demise in April 2024.  We are expecting more detail in the Finance Bill, which is due to have its first reading in Parliament on 27 November 2023.

TPR “welcomed” the reforms, which it considers will help progress consolidation of schemes, and published a blog emphasising its intention to “drive consolidation in savers’ interests so that only good schemes remain”.

Please see our Alert for more details.

TPR and FCA statements on the VFM framework

Responding to the Autumn Statement, TPR and the FCA released statements on the proposed VFM framework which was consulted on earlier this year. The FCA intends to consult on draft rules for contract-based schemes in spring 2024 and it will share feedback received with TPR and the DWP. TPR encourages trust-based schemes to engage with the FCA’s consultation “so that there are no barriers to implementing” the framework in the trust-based environment.

Government responds to WPC inquiry on DB schemes with LDI

On 20 November 2023, the WPC published the Government’s response to the DB schemes with LDI inquiry. The response sets out the Government’s progress to date and proposals for future work on the WPC’s recommendations, including that:

• TPR is working to produce a report by the end of 2023 on the impact of the LDI crisis of September 2022 on pension schemes
• TPR will introduce new questions to the DB scheme return to improve oversight of asset liquidity, and will survey investment consultants and schemes to check that its guidance on governance and operational procedures is being followed. The DWP will then consider whether changes to disclosure requirements are appropriate
• TPR and the DWP are exploring what additional skills and capabilities they may require to embed financial stability considerations into TPR’s work, and
• the DWP plans to lay its new DB scheme funding and investment regulations before Parliament “in due course”.

PLSA publishes case studies on investment in illiquid assets

On 20 November 2023, the PLSA published a report setting out case studies on illiquid investments from 10 public and private sector schemes, including DB and DC schemes and master trusts. The report is intended to provide information for pension managers, trustees and policymakers on how pension schemes invest in illiquid assets and the issues to consider.