A] Prelude
For more information on pension systems, risk and coverage, feel free to visit our dedicated webpages:
https://expatpensionholland.nl/uk-expat-pensions
https://expatpensionholland.nl/global-pillars-systems
https://expatpensionholland.nl/global-investments-risks-0
https://expatpensionholland.nl/global-social-security-coverage
B] The Issue
We will now pay attention to pension related new developments within The UK.
C] Delay to Pensions Review
We have mentioned the Government's Pensions Review. The second phase of that review, which was expected to be completed in the Spring of 2025 has reportedly been delayed.
A key focus for that stage was adequacy, which we expect would have looked at widening participation in auto enrolment. It is not clear what the timescales for the second stage will be, and so DC scheme trustees and managers and participating employers will need to take note of any emerging legislation resulting from the review as it progresses.
In the meantime, it should be noted that the thresholds for auto-enrolment (ie the earnings trigger, and the lower and upper qualifying earnings limits) are being held at current levels for the next tax year.
D] Updated covenant guidance
The Pensions Regulator (TPR) issued its much awaited updated covenant guidance in December 2024. TPR says that 'all core sections of the revised guidance contain important new elements looking at: cash flow; reasonable affordability; maximum affordable contributions; reliability period; covenant longevity; and contingent assets'. It also reiterates the importance of the trustees understanding that their journey plan to low dependency under the new scheme funding regime is supportable by the employer.
There is also a pleasing focus on proportionality, with TPR expecting trustees to be able to use the guidance to review whether their current covenant analysis is focused on the right areas and remains proportionate, especially if there has been a recent significant change in their scheme's funding position in recent years.
Trustees of DB pension schemes will be expected to read all applicable areas of the guidance in full and will need to ensure their covenant review and monitoring practices are consistent with the new guidance. Employers should also take note of how their covenant is expected to be assessed in this context going forwards.
E] Guidance on dashboards updated
Just before Christmas, The Pensions Regulator (TPR) issued updated guidance in relation to pension dashboards in light of external developments and feedback. The updated version now:
- has clarified where details relate to members for whom a match is found or savers using the dashboards more broadly;
- provides further explanation of how schemes will register with the Money and Pensions Service and the stages in the connection process;
- includes more detail about matching requests and data preparation for matching purposes (including data protection issues);
- expands on ongoing connection and record keeping requirements.
There is also useful guidance for schemes with multiple sections eg where there are data discrepancies between sections.
With the pensions dashboard connection timetable in place, dashboard preparedness, particularly in terms of data preparation, should be a key focus for schemes subject to the dashboard requirements. The updated guidance itself recognizes that dashboard processes are still developing and are subject to further testing and that the guidance will be further updated to reflect industry experience; schemes will need to monitor any developments in this regard and update their processes accordingly.
F] Delay to finalizing PPF 25/26 levy
The Pensions Protection Fund (PPF) has said it will confirm its final rules about the 2025/26 levy this month (January) following feedback on its consultation last Autumn on maintaining the levy at £100 million.
The PPF has said that, following the consultation, the PPF Board has been carefully considering all options, including reducing the levy further before any legislative change (which is also being considered as part of giving the PPF more flexibility around the levy, including reducing it to zero). Schemes should monitor any further announcements in this regard.
G] The Pensions Ombudsman update
At the end of last year The Pensions Ombudsman (TPO) posted a blog reflecting on progress in relation to its Operating Review, and also approaches taken in relation to older and model cases. Some key points are:
- Given that TPO requires complaints to be completed through schemes' internal dispute resolution procedures (IDRP) before it will investigate, this reinforces the need for schemes to ensure that their IDPR procedures are robust and there is proper signposting for members (the TPO has a factsheet with some wording that it suggests can be used);
- TPO is using a 'lead case' approach more frequently where it identifies an industry wide issue or a scheme specific issue affecting multiple members. This is where TPO selects a representative 'lead case' to accelerate and present its reasoning quickly in a clear and comprehensive way that can be used to support making decisions in other similar cases. That being so, TPO has suggested that if a scheme has an issue affecting multiple members, it should let TPO know at an early stage, so TPO can explore with the scheme whether or not a lead case approach is appropriate.