PENSION ADMINISTRATION TECHNICAL HELP
PATHways 163
Highlighting pensions news and legislation that has
particular relevance to what we do in pension administration
In this edition of PATHways, we cover:
- HMRC (HM Revenue & Customs) newsletter
- Government pensions review - terms of reference for phase one
- Pension Administration Standards Association (PASA) publishes guidance on preparing for change to normal minimum pension age (NMPA)
- Financial Conduct Authority (FCA) - consultation on Value for Money (VfM) framework for pension schemes
- Pension Protection Fund (PPF) publishes updated retirement factors
- Pensions Dashboard Programme (PDP) draft code of connection updated
Bhavna Baines contributed to the writing of this newsletter.
HMRC newsletter
Pension Schemes Newsletter 161 was published by HMRC on 7 August including:
- Abolition of the lifetime allowance (LTA) – the Government held a short technical consultation (closed 14 August) on draft legislation to address the technical inaccuracies identified with the legislation that abolished the lifetime allowance. When circulating the draft regulations, HMRC informed that the Government plans to introduce the necessary regulations as soon as the parliamentary timetable permits after the summer recess.
- Managing pension schemes service – advises that schemes need to act now to migrate their pension scheme to the Managing pension schemes service if they have not already done so. The newsletter also provides instructions on what to do if a pension scheme was incorrectly re-registered or if a scheme is inactive and should be wound up.
The newsletter also includes pension flexibility data – the number of tax repayment application forms processed and the total value of tax repaid for the first quarter of the 2024/2025 tax year and qualifying recognised overseas pension schemes (QROPS) transfer data –total values and number of transfers to QROPS per tax year from 2006 to 2024.
In addition, HMRC continues to make updates to its Pensions Tax Manual, primarily in relation to the abolition of the LTA. Recent updates include changes to the guidance on the transitional rules for individual protection and transitional tax-free amount certificates. Further updates are expected to continue, following the expected changes to legislation required to rectify the technical inaccuracies identified.
Government pensions review - terms of reference for phase one
The Government has published the terms of reference for phase one of the pensions review launched by Chancellor Rachel Reeves. The terms of reference confirm that the review will focus on developing policy in four key areas:
- driving scale and consolidation of defined contribution (DC) workplace schemes
- tackling fragmentation and inefficiency in the Local Government Pension Scheme (LGPS) through consolidation and improved governance
- the structure of the pensions ecosystem and achieving a greater focus on value to deliver better outcomes for future pensioners, rather than cost
- encouraging further pension investment into UK assets to boost growth across the country
According to the terms of reference, the first phase will focus on investment and report initial findings later this year and ahead of the introduction of the Pension Schemes Bill, whilst the second phase will start later this year and, alongside investment, will consider further steps to improve pension outcomes, including assessing retirement adequacy. The Government has also confirmed that ongoing policy development with respect to defined benefit (DB) workplace pensions schemes will remain separate from the review.
PASA publishes guidance on preparing for change to NMPA
PASA has published guidance on preparing for the change to the NMPA ahead of the increase to age 57 from 6 April 2028. The guidance is designed to support trustees and administrators to:
- identify scheme members with a pension protected age (PPA) affected by the change in NMPA;
- deal with PPAs attaching to transferred in benefits;
- understand how these changes differ to the last NMPA increase in 2010; and
- provide a checklist of actions schemes might wish to consider preparing for the new legislation.
PASA new and updated guidance
The Pensions Administration Standards Association (PASA) has published new and updated guidance during June 2024 in several of the areas its working groups cover.
Data Presence vs Accuracy
The PASA Data Working Group continues to produce content regularly and has published new guidance on ‘Data Presence vs Accuracy’. The main part of the guidance focuses on what trustees can do to improve data accuracy, suggesting trustees conduct an audit of data quality to identify potential issues in their data and areas of weakness, and on reviewing the data accuracy, carry out data remediation work as necessary. The guidance also suggests that consideration is given to ongoing monitoring on a periodic basis to help ‘future proof’ data accuracy.
Master trust transitions guidance
The PASA Master Trust Working Group has published updated guidance on master trust transitions following on from the original version issued in November 2019.
The updated guidance accounts for developments in the master trust space in the intervening years and is designed for situations involving transitions of savers to and from master trusts, focusing on the two most common scenarios:
- master trust to master trust; and
- single employer trust to master trust.
As well as industry developments, other topics covered include transition planning and suggested project governance, and communications.
FCA - consultation on VfM framework for pension schemes
The FCA has published a consultation seeking views on a new VfM framework for workplace DC pension schemes to be used by providers and those making decisions on behalf of members to provide greater transparency over how schemes are performing.
Under the framework, schemes would be assessed in three main areas: investment performance; costs and charges; and the quality of service provided to savers.
The FCA confirmed that whilst the consultation relates to rules for FCA-regulated firms operating contract-based pensions, its proposals are based on previous joint work with the Department for Work and Pensions (DWP) and The Pensions Regulator (TPR) and are 'designed to be suitable for application across the DC workplace pensions market.' The consultation closes on 17 October.
To support this message, TPR has published a blog to encourage those involved with trust-based DC pension schemes to participate. Within it, Nina Blackett, TPR’s Interim Executive Director of Strategy, Policy and Analysis, explains why trust based DC schemes “must also seize this opportunity to shape one of the biggest revolutions in pensions policy since auto-enrolment”.
PPF publishes updated retirement factors
The Pension Protection Fund (PPF) has reviewed its retirement factors due to recent changes in financial markets and has made some necessary changes to its calculations. These changes will come into effect for anyone retiring on or after 1 November 2024 and affect the options those retiring may choose to take, such as a tax-free cash lump sum and early or late retirement.
PDP – draft code of connection updated
The PDP has updated its draft code of connection. The draft code sets out how pension providers, schemes and dashboard providers are to connect to the dashboards ecosystem and what they need to do to remain connected.
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