This week we cover the following topics: Government consults on options for DB schemes; HRMC pension schemes newsletter; FRC begins first phase of UK Stewardship Code review; TPR publishes report on 2023 DB survey

Government consults on options for DB schemes

The government has published a consultation, ‘Options for DB schemes’, following the Mansion House proposals and its recent call for evidence on changes to surplus repayment rules for DB schemes and the creation of a DB consolidator. The aim of changing the rules on surplus repayment would be to encourage greater investment in productive finance by providing incentives via greater flexibility to share surplus with scheme members and sponsoring employers, and the introduction of a DB consolidator would provide a new alternative to buy-out.

The government proposes a statutory override so that schemes could amend their rules to allow for payments from surplus funding, or a statutory power allowing schemes to make such payments. It raises the possibility of changing the tax rules to allow one-off payments from surplus without these being unauthorised. One key area in the consultation is how to ensure that member protection is maintained – that is, given that extraction of surplus will reduce security for members, what should be the parameters within which it would be permitted?

The second part of the consultation discusses the proposed public sector DB consolidator operated by the Board of the Pension Protection Fund, and what the eligibility criteria should be for schemes to transfer to such a provider. The consolidator would be expected to invest part of its fund in UK productive finance assets.
The consultation includes a short survey aimed at assessing the level of interest of DB schemes in these proposals, to inform policy design. The consultation closes on 19 April 2024.

Read the consultation.

HRMC pension schemes newsletter

HMRC’s latest pension schemes newsletter (no. 156) mentions the new Finance Act only briefly and promises further information and guidance on the abolition of the lifetime allowance newsletter shortly.

The newsletter provides a link for pension scheme administrators on filing a pension scheme return on the Managing Pension Schemes service and discusses the tax treatment of interest relating to compensation arising under the public service pensions remedy (sometimes called the McCloud remedy, which addresses discrimination in public service pensions reforms from 2014).

Read the newsletter.

FRC begins first phase of UK Stewardship Code review

The Financial Reporting Council (FRC) has announced a fundamental review of the UK Stewardship Code to ensure that it supports growth and the UK’s competitiveness. As part of the first phase of the review process, the FRC is seeking views from stakeholders including pension schemes and asset managers on whether the Code is being used in a way that drives better stewardship outcomes from engagement with issuers. The revised Code is likely to be published in early 2025.

Read the statement.

TPR publishes report on 2023 DB survey

TPR has published a report summarising the results of its annual survey of trust-based occupational DB schemes. The survey covered areas including current DB funding and investment practices, knowledge about pensions dashboard requirements and administration matters.

Read the report.