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Pensions received top billing in Chancellor Jeremy Hunt’s Autumn Statement, with investment for growth and consolidation key themes as expected.
The majority of the announcements were familiar from July’s Mansion House speech, with only the well-trailed DC pot-for-life proposal being attention-grabbingly new.
So, with implications for DB, DC and public sector schemes, what was confirmed, when is it coming, and what might it mean for you?
The government aims to boost business investment by £20m a year by unlocking pension scheme investment opportunities. It has written to the FCA and TPR setting out its vision for pensions market in 2030 (with suitable retirement options for savers, supported by a provider market that delivers value for members), and the investment measures to get there. It welcomed the regulators’ continued support in implementing policy to deliver this vision.
To support investment into ‘the UK’s most innovative companies’, new investment vehicles will be created via the Long-term Investment for Technology and Science (LIFTS) initiative, ‘tailored to the needs of pension funds’. It will also establish a Growth Fund within the British Business Bank, giving pension funds access to investment opportunities in ‘the UK’s most promising businesses’.
The government is exploring the development and wider use of CDC in decumulation. Its response to consultation proposes placing duties on occupational scheme trustees ‘at the earliest opportunity’ to offer decumulation services and products ‘at an appropriate quality and price’ when savers access their benefits. Schemes will also be required to devise a backstop default decumulation solution, based on the general profile of their members, that a member would be placed into if they access their pension assets without making an active choice.
In the meantime, the government encourages schemes to voluntarily to develop a decumulation offer or enhance their current services. To support this TPR will bring forward interim guidance to show how the objectives of these policies can be met without legislation, and to encourage innovation.
To increase opportunities for DB schemes to invest in productive finance while fully protecting member benefits, the government will consult ‘this winter’ on:
The authorised surplus repayment charge will be reduced from 35% to 25% from 6 April 2024.
Among other public-sector related announcements, the government confirmed its plans to utilise the LGPS to boost investment, with guidance to be amended to require existing investment in private equity to double to 10% of assets, giving the potential to ‘unlock’ £30bn by 2030.
The deadline for transferring all LGPS assets to pools has been confirmed as March 2025, with the direction towards pools exceeding £50bn of assets.
The government responded to the call for evidence on trustee skills, capability and culture, which looked ‘to deepen the evidence base around trustee capability and other barriers to trustees doing their job in a way which is effective and results in the best outcomes for savers.’
The government is now taking forward some immediate actions to address issues raised by respondents (including TLT), including supporting TPR to put in place a trustee register; to develop the accreditation of professional trustees; to update investment guidance and trustee understanding of alternative investments; and to engage with employers selecting a pension scheme (so that focus is not purely on low costs). TPR’s trustee toolkit is also currently being reviewed to align better with their codes of practice and guidance.
TPR’s forthcoming General Code, once laid, will set accreditation for professional trustees as an expectation. TPR states that ‘every trustee body should include someone who meets professional standards, be highly qualified and able to balance competing priorities to deliver the best outcomes for savers. Where this is not possible, ‘trustees should consolidate’.
For more information on any of these developments and the impact on your scheme, please speak to your usual TLT Pensions team contact.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2023. Specific advice should be sought for specific cases. For more information see our terms & conditions.
24 November 2023