What's coming up in pensions

The Spring Budget on 6 March continued to encourage the use of pension funds to boost UK equity investment (in line with the government's Mansion House proposals). Revised annual reporting guidance now requires LGPS funds to provide a summary of asset allocation, including in UK equities (as well as provide greater clarity on progress of pooling), and applies to 2023/24 annual reports (due for publication by 1 December 2024) and onwards. The government pledged to review whether further action should be taken if this data does not demonstrate that UK equity allocations are increasing.

Schemes may wish to consider The Taskforce on Social Factors’ finalised guide on considering social factors in pension scheme investment; this aims to support trustees with activities to begin to identify and monitor social risks and opportunities of their scheme’s investments.

The Finance Act 2024 came into force on 6 April, in theory completing the abolition of the Lifetime Allowance (LTA). In practice it’s a complex picture, involving additional regulations and a web of underlying guidance notes and newsletters. See our Insight for more detail.

The Finance Act 2004 (Registered Pension Schemes and Annual Allowance Charge) Order 2024 which also came into force on 6 April provides for pensionable service in legacy and reformed public sector schemes to be combined for the purposes of calculating an individual's pension input amount against their Annual Allowance.

Further amending regulations are still required to fix some of the issues that have come to light (still awaited at the time of publication). HMRC guidance continues to be issued (at the time of going to press, newsletter 160 was the latest, alongside a lengthy consolidated list of LTA FAQs to date), and the Pensions Tax Manual is being gradually updated. Public sector schemes should continue to work with their advisors and administrators to understand and implement the changes – and stay aware of continued developments in this area.

Further updates have been made in respect of the McCloud unlawful age discrimination. The Finance Act 2024 contains provisions to modify how the tax framework applies to certain public sector redress payments, to align schemes in relation to the judgment. The Public Service Pensions (Exercise of Powers, Compensation and Information) (Amendment) Directions 2024 amend 2022 directions in respect of the interest to apply to corrective payments from public service schemes to members, and from members to schemes, under the McCloud remedy.

HMRC's newsletter 158 contains guidance on the impact of the abolition of the LTA on McCloud remedy implementation. Newsletter 159 explains that the tax treatment of interest guidance in earlier newsletter 156 has been supplemented: where interest payment is required by HMT or a Tribunal, in respect of late payment of a benefit, this interest payment will be authorised.

The House of Commons library has updated its McCloud briefing paper, and a detailed paper on implementing the remedy for the Police Pension Scheme was published on 20 May.

The Fire Brigades Union (FBU) is seeking permission to appeal to the Supreme Court in relation to the Government's proposed method of paying for the costs incurred by the McCloud ruling. The FBU and British Medical Association’s judicial review of the method was dismissed by the High Court in 2023, which ruled in favour of HMT on all grounds. Their appeal was dismissed by the Court of Appeal in April 2024, which ruled that the Directions had not been made for an improper purpose, and that it was open to HMT to include McCloud remedy costs in the cost control mechanism as ‘member costs’.

Further GAD valuations have been finalised for a number of schemes, including the Civil Service, Teachers, Police and LGPS. These determine employer contribution rates from April 2024 onwards. This was the first scheme valuation undertaken since revisions were made to the cost control mechanism. The methodology by which this is undertaken was revised in 2023; the process was also revised to include consideration of the wider economic situation through a new ‘economic check’. The LGPS scheme advisory board has confirmed that it is not minded to recommend any changes to scheme benefits.

The Economic Activity of Public Bodies (Overseas Matters) Bill, which contained provisions ‘to prevent public bodies from being influenced by political or moral disapproval of foreign states when taking certain economic decisions’ had reached Committee Stage, but ended there with the dissolution of Parliament. An LGA Technical briefing had been published.

The National Health Service Pension Schemes (Amendment) Regulations 2024 came into force on 1 April. The regulations make changes to member contributions and implement a new employer contribution rate in line with the 2020 actuarial valuation. They also make amendments to make extended working or return to work more appealing. Changes connected to the Carer’s Leave Act 2023 and to the abolition of the LTA to ensure scheme rules continue to operate as intended and accommodate new requirements are also covered.

The Armed Forces Pensions (Amendment) Regulations 2024 came into force on 6 May. These seek to remedy revaluation discrepancies in the Armed Forces Pension Scheme 2015.

The Firefighters’ Pension Scheme (England) (Amendment) Regulations 2024 came into force on 27 March and amend the Firefighters’ Pension Scheme (England) Regulations 2014 to make provision for unpaid carer’s leave to be included in calculating pensionable service, and to remedy an error in the Treasury Revaluation Orders for 2021 and 2022.

The Carer's Leave (Consequential Amendments to Subordinate Legislation) Regulations 2024 also tweak the Teachers’ Pension Scheme in respect of Carer’s Leave changes.

The MoJ has consulted on proposals to amend various judicial office pension regulations, ‘to facilitate the efficient functioning of the Judicial Pension Scheme’. Among other things, these amendments provide for an employer cost cap in JPS22 following the completion of the first scheme valuation in February 2024, and cover a number of technical amendments. The consultation closed on 14 April.