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Pensions: 2024 Developments

Following the announcement of a “comprehensive package of pension reform” in the Chancellor’s 2023 Autumn A statement in November and the long-awaited General Code of Practice by the Pension’s Regulator early this year.

Mansion House Reforms and the Autumn Statement

Following the announcement of the Mansion House reforms in July 2023, the Autumn Statement foreshadowed a series of consultations and measures regarding pensions, which are anticipated to be completed by 2024.

  • Discussion plans (DB plans) – expected government discussions on potential rule changes regarding when a DB plan surplus may be repaid, the possibility of 100 per cent PPF coverage for DB plans that opt to pay a higher levy, and how the Pension Protection Fund (PPF) could serve as a public consolidator for DB plans not presently served by the market. Additionally, beginning April 6, 2024, the tax rate on authorised surplus payments will decrease from 35% to 25%.
  • The consultation regarding the regulations for the Value for Money Framework, which mandates schemes to conduct comparisons with the broader market to reduce expenses for pension investors, will be initiated by the Financial Conduct Authority (FCA).
  • In response to the consultation it conducted regarding the cessation of small pot proliferation, the government has confirmed that it will implement a multiple default consolidator model to consolidate eligible pension pots valued at less than £1,000.
  • The anticipated government response to the evidence call that concluded on January 24, 2024, concerning the Lifetime Provider Model, which would allow individuals who have changed employers to continue receiving contributions into their current pension scheme instead of accumulating a new pot with each employment transition (a “pot for life”).
  • Following the release of a comprehensive assessment of the master trusts market, which encompasses an overview of the Pensions Regulator’s approaches to strengthening its oversight of master trust investment governance and strategies in anticipation of a legislative framework, the DWP might contemplate enacting legislative amendments.
  • Confirmation that the Lifetime Allowance (LTA) will be removed on April 6, 2024, as authorised by the Autumn Finance Bill of 2023.
  • Decumulation – In response to the government’s consultation on the proposed framework, an anticipated consultation on plans to impose duties on defined contribution (DC) scheme trustees to provide decumulation services and products is expected. In the interim, the Pension Regulator and the government are expected to issue guidance in early 2024.
  • A response was provided in response to the government’s request for evidence regarding the skills, capability, and culture of pension trustees. The response acknowledged that certain trustees might benefit from supplementary support, guidance, and training. Furthermore, it confirmed the prompt measures taken to address the concerns raised in the call for evidence.

Enrolment Automaticity Regulations

Consultation on the proposed changes is likely in due course, provided that the Secretary of State for Work and Pensions now has the authority to enact regulations lowering the minimum age for eligible workers to be automatically enrolled into a pension scheme and/or reducing or eliminating the lower earnings threshold.

Transfer Policies

The Department for Work and Pensions (DWP) published a report on the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 last year in response to industry recommendations that the legislation lacks clarity in significant areas, including the incentives red flag and the overseas investments amber flag. The DWP has declared its intention to collaborate with the industry to strategise modifications to the legislation that would enhance the transfer experience while upholding the legislation’s intended purpose.

Dashboard for Pensions

The pensions sector remains committed to meeting the revised connection deadline of October 31, 2026. It is expected that the DWP will provide additional guidance, such as regarding the staging configuration for schemes to integrate into the dashboard ecosystem.

The Framework for Notifiable Events

And lastly, could the updated framework for notifiable events be implemented in 2024? The anticipated implementation date of the draft Pensions Regulator (Notifiable Events) (Amendment) Regulations 2021 was April 6, 2022. However, the absence of any reference to this legislation in the Autumn Statement or King’s Speech has created uncertainty regarding the timing, if any, of the modifications to the framework’s implementation.

Even though this is not an exhaustive list, 2024 is already gearing up to be an exceptionally hectic year. We will undoubtedly persist in delivering updates regarding the development of the different initiatives. For further discussion on any of the topics addressed in this blog, kindly contact your customary Brodie contact or a member of the pensions team.