Following a dearth of pensions-related developments in the King’s Speech, we were treated to rather more of interest in the Chancellor’s Autumn Statement. Pensions-related news included the following.
Defined benefit (DB) surpluses
There are, currently, limited circumstances in which a DB scheme can return surplus funds to a sponsoring employer. Where such a refund can be made, it is taxed at 35%. The Chancellor has announced that this tax charge will be reduced from 35% to 25% with effect from 6 April 2024.
The DWP will consult further this winter on issues around the repayment of surpluses, as well as on providing 100% PPF coverage for DB schemes that opt to pay a higher levy.
DB consolidation
While the commercial consolidation market is slow to get off the ground, the DWP is going to consult on options for smaller DB schemes, which may be “unattractive to commercial providers”, to consolidate into a new statutory vehicle which would be run by the Pension Protection Fund.
Pension investment expertise and productive finance
The Government has said that it supports the Pensions Regulator’s plans to implement a register of trustees and to update the Trustee Toolkit to include further information on productive finance.
The Government confirmed its intention to establish a growth fund within the British Business Bank (BBB), giving pension schemes access to the BBB’s pipeline of opportunities. It said also that it would commit £250 million to two successful bidders under the Long-term Investment for Technology and Science (LIFTS) initiative. This will create new investment vehicles tailored to the needs of pension schemes, aiming to generate over £1 billion investment to support the UK’s most promising science and technology businesses.
Lifetime Allowance
The Chancellor announced that the abolition of the Lifetime Allowance for pension savings is on schedule and will be complete by 6 April 2024. Several commentators have noted that the process is complicated, involving changes to many pieces of legislation and regulation – leading potentially to unforeseen consequences – and that it would be better to take more time and do the job properly. This is, of course, unattractive given Labour’s promise to undo the changes if it comes to power next year.
A pension for life
The Government is launching a call for evidence on a “lifetime provider” model to address the issue of individuals having several small pension pots, by allowing individuals to move towards having one pension pot for life, which would involve employers having to contribute to each employee’s chosen provider. The Government also proposes to allow a small number of authorised schemes to act as consolidators for eligible pension pots under £1,000.