Key issues for your trustee agenda

Tax changes

The Finance (No 2) Act 2023, which covers the first tranche of changes to pensions tax legislation stemming from the Spring Budget, received Royal Assent in July. This included various increases in the Annual Allowance, removal of the Lifetime Allowance (‘LTA’) charge from 6 April 2023, and a cap on pension commencement lump sums.

Draft Finance Bill 2023-24provisions have now also been published, addressing among other things the abolition of the LTA from 6 April 2024. The Bill introduces two new lump sum allowances, and addresses benefit crystallisation events and the impact on tax protections from that date. A new deadline of 5 April 2025 is also proposed for applications for certain existing protections.

ACTION: We will be watching with interest how the draft legislation develops as the Bill progresses. And with more detail to follow, including on transitional arrangements and new reporting requirements, schemes will need to get up to speed quickly.

Our Insight set out initial key action points post-Budget, including updating scheme administration processes. In light of all the changes, ensure you have given your scheme documentation a health check; consider your communications and how to liaise with members to ensure the changes are understood; and update your record keeping where necessary.

A focus on trusteeship

The Mansion House reforms included a call for evidence on trustee skills, capability and culture, to which TLT, with input from clients, is responding. It asked what barriers there are to trustees doing their job effectively – with a particular focus on whether they ‘have the right knowledge and skills to consider…the full breadth of investment opportunities.’ The industry will be watching closely to monitor any movement towards directives from the Government on asset allocation, and any reinterpretation of fiduciary duties.

Over the summer, TPR has been surveying schemes on the equality, diversity and inclusivity (EDI) of their boards. This follows publication of TPR’s guidance for trustees and employers earlier in the year, which will sit alongside the expectations it sets in its imminent Code (see below). While acknowledging different scheme types, sizes and sectors face different challenges, TPR recommends steps that should be taken now. These include putting an EDI policy in place, reviewing board diversity, and ensuring communications are inclusive.

ACTION: Schemes should watch out for the outcomes of the consultation, and work towards EDI compliance.

Our ‘Trustee Survival Guide’ webinar on 7 September will address the current burden faced by trustees and give some helpful pointers as to what should be on your agenda, and how to manage, prioritise and resource it.

Invalid amendments?

The recent Virgin Media judgment caused shockwaves (in the pensions world at least!), as the High Court ruled that certain amendments to a DB contracted-out scheme’s rules would be void if introduced without the written actuarial confirmation required by legislation. In addition, the judgment confirmed that the requirement covered both past and future service rights, and that it applies to all, and not just adverse, changes.

While we would expect most scheme amendments to have been made ‘correctly’, as the legislation has now been interpreted so widely there are likely to be some instances where historic changes could be held to be invalid – with potentially very expensive implications. Industry bodies are seeking clarity on the issue together, and approaching the Government to note that a legislative solution may be required.

ACTION: Keep an eye on the progress of this case. We currently await the outcome of a hearing on additional matters that was held at the end of July; permission to appeal has also been granted. Any investigations into historic documents in the meantime should be proportionate.

If the judgment is not overturned, clarified, or otherwise legislated for, schemes may need to start to look back at historic deeds. However, potentially affected schemes that are currently in the process of or considering a buyout (for example) should speak to their advisers now.

Pensions Dashboard

With information on the updated staging timetable, data and connection guidance expected imminently, TPR has been urging schemes to make sure they’re ready for connection. PASA’s recent guidance suggests schemes will need around 18 months to be fully 'connection ready' due to industry-wide capacity constraints – so ensure it’s still on your agenda. Its 'Call to Action' outlines five key actions for schemes to take now.

Key cases 2024

Various cases of interest are due in 2024, with two of particular note having appeals heard in June:

• The industry will be watching the appeal in Virgin Media (where certain amendments to DB contracted-out scheme rules were held void if introduced without actuarial confirmation) with great interest, given its potential impact on historic changes. 

• The BBC case, which considered the fetters on a scheme's amendment power in the context of a cost-cutting proposal, will also be keenly followed.