Pensions Insight: 9 to 23 September 2024

This insight covers the PPF’s levy consultation which proposes to maintain the levy at £100m, the introduction of a Pension Wise digital service, TPR’s approach to administrator engagement, and HMRC’s latest newsletters.

TPR publishes interim response to statement of strategy consultation & updated templates

On 23 September 2024, the Pensions Regulator (TPR) announced that it had published updated statement of strategy documents (four different templates depending on if the valuation is Fast Track/bespoke and before or after the relevant date and an accompanying data list) to assist trustees when producing a valuation under the new framework. It also published an interim response to the March 2024 consultation on the statement which outlines the key topics from the 55 responses received and summarises the main changes TPR has made as a result. The revised regime valuation documents will need to be submitted to TPR using a new digital service which is expected to be ready by spring 2025.

Our in-depth article provides further detail.

PPF levy consultation proposes keeping levy at £100m

On 12 September 2024, the Pension Protection Fund (the PPF) published its consultation for the 2025/26 levy rules (open until 23 October 2024).

The intention is to maintain the levy at the 2024/25 level of £100m. To do so and to stop the number of schemes paying the risk-based levy decreasing, a number of changes are proposed, including: (1) increasing the scheme-based levy multiplier to 0.000018; (2) increasing the asset and liability stresses to two standard deviations; and (3) reducing the levy scaling factor to 0.35. The PPF will also continue liaising with the Government regarding changing legislation to allow it to reduce the levy more, possibly even to zero.

It is anticipated that:

• the scheme-based levy will be approximately the same as last year; and
• of the circa 37% of schemes that pay the risk-based levy, there will be reduction for 63% and an increase for just 5% of more than 0.01% of liabilities.

The PPF has also published draft proposed changes to the DRC Appendix, DRC Guidance and ARC Guidance. These include rule updates to reflect that the simplified approach (Option Beta) will be available to all schemes with an expansion of the contributions that can be certified to include special contributions received by schemes which do not have a recovery plan. It will also be simpler for schemes to take account of buy-ins through levy waiver applications (albeit, stopping short of changing the levy rules for buy-ins).

MAPS launches Pension Wise Digital

Pension Wise Digital is a new digital appointment service that offers pensions guidance alongside its current telephone and face-to-face services.

The service is available to anyone over the age of 50 with a defined contribution pension and can be accessed any time, even out of working hours.

Early testing of the digital service, which began in April 2024, consistently received high customer satisfaction ratings of 94%. For more information on the development and role of Pension Wise see here.

TPR increasing administrator engagement

TPR’s 12 September 2024 expanding our engagement with administrators blog discusses the importance of an administrator’s role in pension schemes, the present difficulties faced by administrators including resource strains and how it is engaging with this sector.

Due to the effect that poor administration can have on members, TPR is focusing on increased engagement with administrators (who are unregulated). This initiative started last year with TPR engagement, with three ‘strategically significant’ administrators and has resulted in various recommendations including improved internal checking processes, a need for a clear IT and technology plan and better communications designed to clearly explain complex pension terms.

TPR will now invite 10 to 15 of the 47 largest commercial and non-commercial administrators to voluntarily collaborate to initiate a ‘light-touch’ approach to the wider market over the next 12 months. This next stage of engagement will concentrate on four areas: (1) financial sustainability; (2) risk and change management practices; (3) cyber resilience; and (4) tech and innovation.

HMRC newsletter 162 – LTA regulations to be introduced when parliamentary time allows

HMRC Newsletter 162 confirms that the second set of regulations which will address certain technical amendments that are required to the lifetime allowance abolition legislation will be introduced as soon as parliamentary time allows. This follows a short consultation on the draft regulations which has now ended.

HMRC September newsletter on McCloud remedy

HMRC’s September 2024 newsletter on the public sector pensions McCloud remedy covers a number of different topics including that offsetting legislation will be introduced this tax year allowing the overpaid amount of unauthorised payments charges on lump sums provided prior to October 2023 to be offset against tax amounts due on top-up lump sum payments. Tax charges may arise because members choose different benefits in respect of the McCloud remedy period (1 April 2014 to 31 March 2022) than the ones they actually took. (Members who began receiving benefits after 1 April 2015 and before 1 October 2023 can choose whether they want legacy or new scheme benefits for the remedy period.)

HMRC has also published member guidance for tax on interest received on pension and lump sum arrears – the interest is treated as savings income for the tax year of receipt and tax may be due.