Welcome to our February pensions law update.
For weeks now there’s been a sense of anticipation within the pensions industry. The consultations on IHT on pensions death benefits and on significant reforms to the LGPS and the DC pensions market recently closed. Just as the comparative silence on plans for private sector DB schemes was in danger of becoming deafening, at last on 28 January we had an update from the Chancellor announcing plans to allow DB schemes easier access to surpluses.
In this month’s newsletter we take a closer look at the plans to “unlock” DB surpluses, as well as the options that could be considered in relation to the £13bn surplus in the PPF. We also bring you updates on key actions to prepare for dashboards connection, developments in pension funds holding companies to account on ESG matters, and the Regulator’s approach to auto-enrolment compliance. Plus we consider the IHT on death benefits proposals from the SIPP/SSAS perspective and round up other key pensions news from the past month.
DB surplus release – Government plans announced
On 28 January the Chancellor confirmed that the Government plans to make changes to the law in order to give DB schemes access to surplus assets, and to allow them to invest more flexibly. With details to follow in the response to the DWP’s “Options for DB schemes” consultation “this Spring” we look at what we know so far about the Government’s plans, and some of the legal aspects that may need to be considered.
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On Thursday 6 February Head of Pensions and Lifetime Savings Richard Knight will join XPS Group for a webinar to discuss how the Government’s surplus plans might impact your scheme – please follow the link below to sign up:
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The PPF’s £13bn surplus conundrum
In expectation of further announcements to come in relation to the Government’s vision for the future of DB pensions over the coming weeks, we’ve been thinking about the PPF, and in particular its significant funding surplus – which has been the focus of industry attention over the past couple of years. What are the options for putting the extra £13bn of surplus assets the PPF currently estimates it has to use?
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Stop press! We note that since this article was first published, the PPF has confirmed that this year’s levy estimate has been reduced to £45m (from the £100m initially proposed). This follows positive engagement with the DWP, and the Government has confirmed that it is considering changing the law to relax the restrictions on how much the levy can be increased each year – which the industry is optimistic would give the PPF flexibility to reduce the levy further (even to zero) in future years.
Pensions dashboards update
What’s new for dashboards?
The dashboards developments are coming thick and fast with the first "connect by" dates (for the largest schemes) now only a couple of months away – Andy Prater rounds up the latest on what your scheme needs to know.
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Dashboards compliance: the cyber security perspective
Dashboards connection presents a host of data protection and cyber security risks. Samantha Howell outlines some key actions trustees should consider taking in order to mitigate and manage those challenges.
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ESG: further developments in pension funds taking action against companies
A number of pension scheme investors, including several LGPS funds, have filed a shareholder resolution against Shell, calling on the company to explain its investments in fossil fuels, and how they align with climate goals. Our ESG for Pensions lead Kate Granville Smith explains.
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Auto-enrolment compliance
In recent months there have been a significant and ever-increasing number of fines issued by the Pensions Regulator in relation to failures by employers to comply with their pensions auto-enrolment obligations.
Chris Brown and Kelly Beattie consider recent trends in the Regulator’s enforcement actions.
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Pension Bites
New Pensions Minister appointed
In January 2025 a new Pensions Minister was appointed, following Emma Reynolds move to the newly vacated post of Economic Secretary to the Treasury. New Pensions Minister Torsten Bell inherits a very full and active brief, with significant reforms already tabled for the DC market and the LGPS in 2025 and beyond.
5 April 2025 deadline to apply for tax protections
HMRC newsletter 166 includes a reminder that the deadline for individuals to apply for fixed protection 2016 and / or individual protection 2016 is 5 April 2025. 5 April 2025 is also the long-stop date for pension credit enhancements from previously crystallised rights (earlier dates may apply in individual cases). After these dates individuals will no longer be able to apply for the protections. Although the lifetime allowance has now been abolished these protections could still be relevant for some people as explained in the newsletter.
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Scheme returns
The Pensions Regulator will issue this year’s scheme returns for DB and hybrid schemes at the beginning of February and is urging schemes to prepare by looking at the new questions they’ll be asking this year – these include questions around member data quality, more recent membership profile information and questions about performance of investment consultants against their objectives. The deadline to submit returns is 31 March 2025
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TPO determination – decision not to award increases no breach of Imperial duty
The Pensions Ombudsman has published his determination in a complaint made by Mr S against the trustees of the Smith’s Industries Pension Scheme and the scheme’s sponsoring employer, regarding the employer’s decision not to award discretionary increases to pensions in payment. The Ombudsman held that the decision, made by the employer on financial grounds, did not amount to a breach of the so called “Imperial duty” not to conduct itself in a manner calculated to destroy or damage the relationship of trust and confidence between employer and employee.
TPO said that the obligation to act in good faith did not require an employer to reach a decision which is “fair” between the parties. The employer is entitled to take into account its own interests (financial and otherwise) in the future operations of the scheme – even where those conflict with those of members. In the high inflationary environment of recent years, increases can be a challenging area for schemes and this determination will no doubt be welcomed by employers with similar discretionary increase powers.
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