Pensions: Joint DB & DC trustee agenda update - April 2023
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Publications: 05 June 2023
Publications: 30 May 2023
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Publications: 25 May 2023
Spring budget – pensions tax changes NEW
The key announcement in the Budget was the abolition of the lifetime allowance (LTA) (the limit on the amount of pension that can be built up tax efficiently over a person’s lifetime). The LTA charge has been abolished from 6 April 2023, removing any penalty tax charge for exceeding the LTA after that point, and the LTA will be removed from legislation by April 2024. A cap of GBP268,275 on the maximum Pension Commencement Lump Sum will apply for those without lump sum protection.
From 6 April 2023, the annual allowance (the amount that can be tax efficiently saved into a pension each tax year) has been increased from GBP40,000 to GBP60,000. The adjusted income threshold for the tapered annual allowance (a reduction in the annual allowance for high earners) has been increased from GBP240,000 to GBP260,000. The minimum tapered annual allowance has been increased from GBP4,000 to GBP10,000, as has the money purchase annual allowance, which applies once pension savings have been accessed flexibly. Read more.
ACTION: expect enquiries from members, in particular those who have opted out of a scheme because of LTA protections; update administration; seek training/advice on other impacted areas e.g. lump sums, transfers and GMP equalisation; consider communications.
Dashboards update NEW
The government has announced that the deadlines for connection to pensions dashboards will be delayed (read more). The statement suggests that requirements will remain the same, only the timeline will change. A further update will be given before Parliament’s summer recess.
The Pensions Regulator (TPR) has updated its guidance on pensions dashboards, to reflect the requirements under the finalised Pensions Dashboards Regulations and current standards (read more). Schemes are encouraged to continue preparations, despite the connection deadline delay.
ACTION: continue preparation for pensions dashboards, in line with TPR’s guidance.
DC illiquid assets and performance-based fees
Regulations come into force this month introducing flexibility to exclude specified performance-based fees from the default fund charge cap and requirements for relevant DC schemes to disclose and explain: (i) their policies on illiquid investments; and (ii) the proportions of default fund assets allocated to different asset classes at various specified member ages (read more).
ACTION: prepare for disclose and explain requirements; consider performance-related fees in your investment strategy.
Transfers and scams guidance UPDATED
The Pension Scams Industry Group has published an interim practitioners’ guide to combatting pension scams (read more). The guidance reflects the flags requirements introduced in November 2021 and discusses issues with those requirements.
TPR has updated its guidance on transfer requests, aiming to ensure that members receive the right advice (read more). The Pensions Administration Standards Association (PASA) has released a publication on DC transfers (read more). The Financial Conduct Authority (FCA) has also published a statement on reporting suspicious transfers to them (read more).
ACTION: check your processes against the various pieces of guidance.
Market volatility: TPR guidance
TPR has published guidance on how trustees should address the impact of recent economic conditions on DC benefits (read more). It focuses on member communications and support, governance and oversight, and investment strategies.
ACTION: read the guidance and consider any scheme-specific implications.
Watch this space
- The government has consulted on changes to the notifiable events regime. There is currently no revised date for the delayed regulations (read more).
- TPR has consulted on its proposed single code of practice (to be known as the General Code): watch our webinar on the proposals and read TPR’s interim response. Publication of the revised version of the code is expected soon.
Date for your diary
The Gender Pensions Gap – what it is and how to fix it
The difference between the pension incomes that men and women can expect at retirement is estimated to be twice the size of the Gender Pay Gap. Why is that, and how can we close the gap? Join us at our offices on Tuesday 23 May 2023 when we will be welcoming Legal & General Investment Management’s (LGIM) Stuart Murphy, Co-Head of DC and Alexandra Miles, Senior DC strategist to discuss the gap and what can be done to address it. Sign up here.
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