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Pensions: Joint DB & DC trustee agenda update - June 2023

Welcome to our monthly update on current legal issues for trustees of DB and hybrid pension schemes, designed to help you stay up to date with key developments between trustee meetings, and to support the legal update item on your next trustee agenda. We also have a separate DC-only briefing

TPR guidance on leveraged LDI NEW

The Pensions Regulator (TPR) has published new guidance for trustees on leveraged liability-driven investments (LDI) (read more). The guidance discusses collateral buffers and steps that trustees should be taking in relation to LDI investment.

ACTION: consider your scheme’s LDI approach in line with the guidance.  

TPR annual funding statement NEW

TPR’s latest annual funding statement asks schemes to revisit funding strategies in light of recent funding changes (read more). The statement is relevant to all DB schemes but especially those with valuation dates between 22 September 2022 and 21 September 2023, as well as schemes undergoing significant changes or being asked to reduce contributions, change contingent asset arrangements or consider other uses of surplus.

ACTION: review the statement and consider whether any changes are required to your scheme’s funding strategy or processes.

TPR guidance on employers in distress NEW

TPR has published refreshed guidance on dealing with employers in distress (read more). The updates to the guidance are not significant but the blog post announcing it encourages trustees to revisit the guidance and remain vigilant to current challenges to employer covenants. 

ACTION: ensure your approach on employer covenant is in line with the guidance.

Spring Budget

The Budget announced the abolition of the lifetime allowance (LTA). The LTA charge (the tax charge for exceeding the LTA) no longer applies and the LTA will be removed from legislation by April 2024.

The annual allowance has increased from GBP40,000 to GBP60,000. The adjusted income threshold for the tapered annual allowance has increased from GBP240,000 to GBP260,000. The minimum tapered annual allowance and the money purchase annual allowance have each increased from GBP4,000 to GBP10,000 (read more).

HMRC has published guidance on: individuals with LTA protections (read more); entitlements to higher tax free lump sums (read more); and loss of LTA protections (read more).

ACTION: Expect enquiries from members; update administration; seek training/advice on other impacted areas e.g. lump sums, transfers and GMP equalisation; and consider communications.

Dashboards update UPDATED

The dashboards connection timetable has been delayed (read more). TPR has updated its dashboards guidance (read more) and PASA has published guidance on answering member queries (read more) and data matching (read more).

An Act preventing trustees from using pension scheme assets to indemnify themselves against penalties imposed by TPR for breach of the pensions dashboards requirements has received royal assent (read more). This is in line with existing provisions in relation to other penalties.

ACTION: Continue preparation for pensions dashboards, in line with the guidance. Seek advice on what liability protections are available to trustees and ways to mitigate risk.

TPR climate/ESG reporting reviews UPDATED

TPR has published a review of annual climate reports, identifying common areas for improvement and of good practice (read more). It has also announced initiatives checking trustee compliance with environmental, social and governance (ESG) requirements (read more here and here).

ACTION: Take TPR’s report into account when preparing your scheme’s climate report.

TPR ED&I guidance

TPR has released guidance with actions for trustees and employers to improve equality, diversity and inclusion (ED&I) on scheme boards (read more).

ACTION: Review the guidance and consider whether any actions are relevant to your scheme.

Scams guidance

The Pension Scams Industry Group has published an interim practitioners’ guide to combatting pension scams (read more). The guidance discusses the flag requirements introduced in November 2021.

ACTION: Check your processes against the guidance.

Have your say

  • The DWP has published a call for evidence on the suitability of the auto-enrolment alternative quality requirements for DB/hybrid schemes (read more). Responses should be submitted by 19 June 2023.

Watch this space

  • TPR’s new corporate plan indicates that the launch of the new DB funding code and regulatory framework has been postponed to April 2024 (read more).
  • 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.

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