Pensions in 2023: key developments to be aware of
We consider the key developments to look out for in 2023 including: where to find more in-depth information that has been produced across Gateley, signposting where action is or may be required; and pointing out whether the event/ development is a regular one or specific to 2023.
Schemes will most definitely be kept busy throughout the year with the usual pensions business as well as some significant new developments including the Pensions Regulator’s new single code of practice and the revised defined benefit (DB) scheme funding regime. There is a lot to include in the 2023 scheme business plan.
January 2023 (2023-specific)
Single code of practice (action required – undertake gap analysis and if your scheme has 100 or more members comply with relevant requirements such as carrying out an own risk assessment and producing a remuneration policy)
At the time of writing, the Pensions Regulator’s single code of practice had not been laid out before Parliament – it is expected that it will be during January. Gateley’ s essential guide to the new code can be downloaded here.
31 March 2023 (annual)
Scheme return and the Pension Protection Fund (the PPF) levy (action required)
Deadline for sending:
scheme returns to the Regulator; and
contingent asset certificates, asset backed contribution certificates and special category applications to the Pension Protection Fund.
The Regulator has confirmed detail of relevant changes and updates to the 2023 scheme return. The principal change is that schemes will be required to provide additional asset breakdown information.
The final PPF 2023/24 levy rules confirm that the levy will be almost halved from £390m in 2022/23 to £200m which means that 98% of schemes should see a levy reduction with the majority seeing a reduction of more than half.
See Gateley’s Insight for more details.
5pm, 1 April 2023 (annual)
Contingent assets (action required)
Contingent asset documents including guarantor strength reports need to be emailed to the PPF.
6 April 2023 (2023-specific)
DC performance fees (for information only)
Trustees will be allowed to invest in arrangements that include ‘well designed’ performance fees, where they believe this will be in members’ interests as from 6 April 2023. This will replace the current smoothing provisions.
5pm, 29 April 2023 (annual)
DRC certificates and transfers (action required)
Deficit-reduction contributions certificates and exempt transfer applications need to be sent to the Regulator and the PPF respectively.
Before 7 May 2023 (2023-specific)
SPA review (for information only)
The Government is due to publish its six-yearly review of state pension age (SPA) by 7 May 2023. The review is considering whether the existing timetable for increasing SPA remains appropriate. At present, the increase in SPA from 66 to 67 will take place between 2026 and 2028 with a further gradual increase from 67 to 68 which will take place between 2044 and 2046 for those born on or after April 1977.
The last report was published on 19 July 2017, following which the Government announced an intention to accelerate the increases in the SPA from 67 to 68 over the period 2037 to 2039, seven years earlier than originally planned. However, no legislative changes were introduced in 2017, with the DWP awaiting the outcome of the 2023 review to ensure that any changes reflected more up-to-date life expectancy changes. The impact of the Covid-19 pandemic on the life expectancy analysis remains to be seen.
5pm, 30 June 2023 (annual)
Block transfers (action required)
Full block transfers need to be certified to the Regulator by this deadline. Doing so assists with the 2023/24 levy.
31 August 2023+ (2023-specific)
Dashboards (action required – identify staging date, check quality of scheme data, consider data protection, liaise with advisers)
Schemes will start connecting to the pension’s dashboards ecosystem – the largest master trust schemes go first as from 31 August 2023 and other schemes will need to comply. Deadlines depend on scheme size with the last schemes connecting in October 2025. The Regulator will individually contact schemes at least 12 months before their deadline.
See Gateley’s Insight for more information.
Autumn 2023 (annual)
PPF levy invoices (action required)
The PPF will begin issuing the 2023/24 levy year invoices. Invoices need to be paid within 28 days of receipt.
October 2023 (2023-specific)
Revised scheme funding regime (action required: get up to date with the new requirements, liaise with advisers, consider whether to respond to consultation and look out for final version of the regulations and code)
The Pension Schemes Act 2021 and draft funding and investment strategy regulations (see Gateley’s Insight) herald a new DB scheme funding approach which will require trustees to set a funding and investment strategy. For this first time, schemes must aim to achieve a ‘long term objective’ and produce a written statement of the strategy, a copy of which must be sent to the Regulator. The objective is for a scheme to have, at least, low dependency on the employer, in terms of funding and investment, by the time a scheme is significantly mature.
The draft regulations are expected to come into force in October 2023 together with the Regulator’s revised DB funding code of practice.
The new DB funding code of practice sets out the Regulator’s approach to this new framework including the introduction of a twin track approach, fast track for those schemes that can meet set guidelines and a bespoke route for those that need or want additional flexibility.
The second consultation together with the revised draft DB funding code of practice was published by the Regulator on 16 December 2022 alongside a consultation document on its Fast Track and Twin Track regulatory approach and a response to the first consultation. Gateley’s in-depth Insight outlines the key points from the draft code – this can be accessed here.
1 October 2023 to 1 October 2024 (2023+-specific)
DC illiquid investments (action required if DC)
Relevant defined contribution (DC) schemes will have to disclose and explain their policy on illiquid investment through the statement of investment principles and their default asset allocation in the annual chair’s statement. The disclosures will need to be included by the first date on which the default SIP is revised after 2023 with a long-stop date of October 2024.
31 December 2023 (2023-specific)
EU law (for information only)
The Retained EU Law (Revocation and Reform) Bill repeals certain retained EU law at the end of 2023 unless it is explicitly spared. At the time of writing, there is still uncertainty around which legislation will be repealed and which will be retained.
During 2023: also look out for these 2023-specific developments
Employer covenant guidance (for information only at this stage)
The Regulator will consult on a review of the current employer covenant guidance during 2023 – under the revised scheme funding regime there will be a move away from the existing four covenant gradings to an assessment of financial ability and contingent asset support based upon the legal definition of employer covenant strength that is contained in the draft funding and investment strategy regulations.
Notifiable events (for information only)
Notifiable event changes were expected to come into force during 2022 but they were delayed. Once in force, there will be two additional notifiable events (a decision in principle by scheme employer to sell ‘material proportion’ of its business or assets or to grant or extend a ‘relevant security’) and other changes – see Gateley’s Insight.
Auto-enrolment (for information only)
The Government’s triennial review of the automatic enrolment DC and DB scheme alternative quality requirements is due in 2023. The Private Member’s Pensions (Extension of Automatic Enrolment) Bill which would expand auto-enrolment to all jobholders aged at least 18 and to remove the lower qualifying earnings threshold was delayed but is now progressing and is due to have its second reading in the House of Commons on 17 March 2023.
GMP conversion (for information only)
The Pension Schemes (Conversion of Guaranteed Minimum Pensions) Act 2022 will amend current Guaranteed Minimum Pension (GMP) conversion legislation in various ways including clarifying that the legislation applies to survivors as well as earners, giving a regulation-making power regarding the conditions that must be satisfied with regard to survivors’ benefit and who must consent to the conversion, and removing the requirement to notify HMRC. Much of the detail will be in regulations which trustees should be on the look-out for during 2023.
Data Protection and Digital Information Bill (for information only)
This Bill will “ update and simplify” the UK GDPR and the Data Protection Act 2018 to reduce burdens on organisations and to make certain parts more flexible in terms of compliance. It is currently making its way through Parliament – for further information see Gateley’s Insight.
Pension transfers (action will be required – relevant processes and procedures will need assessing and updating where necessary within the appropriate timeframe after publication of updated Code)
An updated version of the Pension Scams Industry Group’s ‘Combating Pension Scams: a Code of Good Practice’ is expected this year. See Gateley’s in-depth Insight for details of the new transfer value regulations which came into force on 30 November 2021.