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

DWP responds to consultation on broadening the investment opportunities of DC schemes

On 30 January 2023, the DWP published a response to its consultation on broadening the investment opportunities of DC schemes. The consultation sought views on draft regulations and guidance to:

require schemes to disclose and explain their policies on illiquid investment and their asset allocations, and
introduce an exemption for performance-based fees from the charge cap that applies to default funds

(see our Alert for more details).

Following “broad support” in the consultation feedback, the DWP is proceeding with its proposals with relatively minor amendments, and intends to bring regulations (accompanied by statutory guidance) into force “by the spring”.

DWP, the FCA and TPR consult on value for money framework

A joint consultation on a new value for money framework was published on 30 January 2023, seeking views on policy proposals requiring trustees and managers of DC occupational pension schemes and providers and IGCs of workplace personal pension schemes to disclose, assess and compare the value for money of their schemes. It sets out proposed metrics and standards, along with a step by step process for assessing value for money.

The changes would be implemented in phases, applying initially to default arrangements used for automatic enrolment (“AE”), and legacy DC schemes (ie those which are not used for AE but to which an employer has contributed on behalf of two or more members in the past).

The consultation closes on 27 March 2023. The FCA expects to carry out a further consultation with proposed changes to FCA rules, taking account of responses to this consultation. The DWP also expects to conduct a further consultation with proposed changes to regulations.

DWP consults on extending opportunities for CDC schemes

On 30 January 2023, the DWP published a consultation on policy proposals related to CDC schemes, following the introduction of single and connected employer CDC schemes in 2022. The proposals include:

introducing multi-employer CDC schemes, and
the possibility of enabling “decumulation-only” CDC schemes, and how these might work in practice with oversight by TPR. This follows a 2022 call for evidence on helping savers understand their pension choices (see our Alert for details).

The consultation closes on 27 March 2023.

DWP calls for evidence on addressing the challenge of deferred small pots

On 30 January 2023, the DWP issued a call for evidence to “deepen the evidence base around the scale and characteristics of the growth in the number of deferred small pots”, building on work by the Small Pots Cross-Industry Co-Ordination Group (see 7 Days). The call for evidence focuses on two large-scale automated consolidation solutions:

a default consolidator model, where eligible pots would transfer automatically to a consolidator, with members being given an opportunity to opt-out, and
a “pot follows member” model, where, if a member changes jobs, their deferred pot would automatically move with them to their new employer’s scheme.

The call for evidence closes on 27 March 2023, and the responses will inform the DWP’s development of an approach which will be consulted on “in due course”. In addition to the call for evidence, research into member engagement with workplace pension will support the development of the policy.

Automatic enrolment earnings trigger and qualifying earnings bands to remain unchanged for 2023/24

The DWP published its annual review of the AE earnings trigger and qualifying earnings band for 2023/24 on 26 January 2023. The Secretary of State has concluded that both the existing earnings trigger threshold of £10,000, and the band of “qualifying earnings” on which minimum contributions are calculated (£6,240 as the lower limit and £50,270 as the upper limit), remain appropriate. This represents a decrease in real terms in the value of the thresholds.

TPR publishes DC scheme return data for 2022 to 2023

TPR has published its annual analysis of DC scheme return data for 2022 to 2023. Findings include that the DC market continues to consolidate, with the number of “non-micro” schemes with 12 or more members, including hybrid schemes, declining by 11% in the period. Since the beginning of 2012 the number of these “non micro” schemes has decreased from 3,660 to 1,220.