Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of workplace pensions.
This week we cover the following topics: Finance Bill receives Royal Assent; TPR: blog post on wider ESG risks and opportunities; PDP: blog post on dashboards digital architecture; TPR publishes latest statistics on UK DB landscape; High Court approves compromise solution in Avon Cosmetics case;
Finance Bill receives Royal Assent
The legislation that will abolish the lifetime allowance and replace it with a new system of allowances for tax-free lump sums and death benefits from 6 April 2024, received Royal Assent on 22 February.
HMRC has indicated that changes remain to be made on various issues. The legislation includes a wide regulation-making power for HM Treasury to amend, revoke or make different provisions relating to the abolition of the lifetime allowance at any time up to 5 April 2026, which will allow it to make HMRC’s proposed amendments. However, this means that there is still, for the moment, some uncertainty about specific aspects of the new framework.
TPR: blog post on wider ESG risks and opportunities
The Pensions Regulator’s latest blog post encourages trustees to think about how they could further develop their approach to managing wider environmental, social and governance (ESG) risks and opportunities – for example, by familiarising themselves with recommendations from the Taskforce for Nature-related Financial Disclosures or the Taskforce for Social Factors. It also highlights the work of the UK Transition Plan Taskforce, suggesting that transition planning can support trustees to achieve sustainable investment. Commenting that ‘the direction of travel is clear’ in relation to progress in these areas, the blog post acknowledges that data remains a challenge, but suggests that it may be possible to use a qualitative narrative approach to support trustee action.
Read the blog post.
PDP: blog post on dashboards digital architecture
The Pensions Dashboards Programme has published a blog post explaining the central digital architecture of the dashboards ecosystem, which enables the flow of data between dashboards and pension schemes.
The architecture consists of three services: the identity service which verifies users; the consent and authorisation service which manages access to information in line with the user’s authorisation; and the pensions finder service which sends a request for the user’s information to all providers and schemes, and then provides the matching information to be displayed to the user on a dashboard.
Read the blog post.
TPR publishes latest statistics on UK DB landscape
The Pensions Regulator has published its latest annual overview of the occupational defined benefit (DB) and hybrid scheme landscape in the UK, covering scheme status, membership levels and assets under management. The statistics show that the number of DB and hybrid schemes continues to reduce, and the percentage of schemes closed to future accrual continues to rise, both at a consistent rate. The report also shows an improvement in scheme funding levels compared to the previous year.
Read the report.
High Court approves compromise solution in Avon Cosmetics case
In a follow-up to a recent decision, the High Court has approved representation orders and a compromise agreement to settle claims relating to the Avon Cosmetics Pension Plan: Avon Cosmetics Ltd v Dalriada Trustees and others.
The earlier decision dealt primarily with the legal issue of identifying the consequences of an ‘excessive exercise’ of the amendment power – given that changing the scheme from a final salary to a career average revalued earnings basis would have a potentially detrimental effect on the accrued benefits of some members (contrary to the restriction on the amendment power), was it wholly invalid, or did it remain valid in relation to members for whom there was no detrimental impact? Having found that the amendment would be partially valid, the question remained whether or not the amendment was effective to break the link with final salary and to require benefits to be calculated on a CARE basis in relation to other members. The company said that it had the will and resources to continue to litigate the matter, but all parties had agreed a potential compromise in the interest of avoiding further litigation and its costs, achieving certainty and clarification of benefits, and speeding up the distribution of ‘catch up’ payments.
His Honour Judge Davis-White KC was satisfied that it was appropriate for the court to approve the compromise on the basis that it had advantages for all involved and was for the benefit of all those represented.
Read the decision.
