Here is our weekly summary of key legal and regulatory developments relevant to occupational pension schemes that you might have missed, with links for further information.
- HM Revenue and Customs (HMRC) has published pension schemes newsletter 175. This includes an overview of the pensions tax measures in the Autumn Budget, which we summarised in our 26 November weekly update. More information is provided about the measure to allow direct payment of surplus assets to members and beneficiaries. Such payments will be treated as authorised payments and will be taxed as pension income at the individual’s marginal rate of tax. Schemes will have to be in surplus on the same funding basis as applies to payments to employers. This is currently the full buyout basis, although the government has indicated its intention to relax this. The member will have to be above their normal minimum pension age. The newsletter also contains more information about the inheritance tax changes that will come into effect in April 2027. If personal representatives reasonably expect that inheritance tax will be due, legislation will give them the power to direct pension scheme administrators to withhold 50% of the taxable benefits for up to 15 months from the date of a member’s death. They can then direct pension scheme administrators to pay inheritance tax due to HMRC from the withheld benefits before releasing the balance to the beneficiaries. There will be some limited exceptions. Personal representatives will also be discharged from liability for any pensions that are discovered after they have received clearance from HMRC.
- The House of Commons has published an updated briefing paper on pensions tax, following on from the budget. This includes a summary of the way that salary sacrifice currently operates, as well as the impact of the budget announcement. There have been reports in the media that the government has said that it will reassure markets that the £2,000 salary sacrifice cap will proceed, by legislating in the next few weeks, although the cap will not be effective until April 2029.
- The government has tabled amendments to the Pension Schemes Bill, in advance of the report stage being held today (3 December). These include:
- An amendment so that the costs of the Pension Protection Fund (PPF) Ombudsman will be met out of The Pensions Regulator’s (TPR) general levy. This will be treated as having come into force from 1 April 2007, in line with what has happened in practice.
- Amendments to provide for the indexation of PPF and Financial Assistance Scheme (FAS) compensation in relation to pre-1997 accruals. Increases would be by reference to the consumer prices index capped at 2.5% and are estimated to cost £1.2 billion. They will commence on 1 January 2027, for those members whose scheme rules provided for such indexation. The PPF assesses that around 165,000 PPF and 91,000 current FAS members have some pre-97 benefits where their former schemes provided mandatory indexation and so would benefit from this amendment.
- Amendments so that administration expenses of the PPF and Fraud Compensation Fund will be payable out of those funds, instead of through a separate administration levy. This will be effective from 1 April 2026.
- Amendments to asset pooling provisions in the Local Government Pension Scheme.
- Refinements to the way in which small pot consolidation will operate.
- An amendment to the asset scaling requirements that will ensure that, when determining whether a relevant master trust (or group personal pension plan (GPP)) has sufficient assets (£25 billion) to be approved under the new sections of the Pensions Act 2008, the assets of connected relevant master trusts/ GPPs will be included, along with an amendment that regulations would specify the types of relationships that would constitute being “connected”.
- Amendments in relation to the Virgin Media remedy, which include minor clarifications, along with a few more significant changes. The first amendment of substance is in relation to what action would constitute “positive action” that would exclude a scheme from being able to take advantage of the Virgin Media remedy. Clause 100(7)(b) is amended to clarify that “taking any other step in relation to the administration of the scheme” actually means notifying any members of the scheme in writing to the effect that the trustees or managers are taking (or have taken) “any other step in relation to the administration of the scheme”. The second amendment of substance is in relation to the types of legal proceedings that would exclude a scheme from benefitting from the Virgin Media remedy. The government amendment clarifies that legal proceedings relate to court proceedings, and not proceedings of a tribunal or The Pensions Ombudsman and that there must be a dispute as to the rules of the scheme, where the parties are or include both the trustees or managers of the scheme and beneficiaries or their representative. The third amendment of substance is to clarify that so far as the Virgin Media remedy applies in relation to a scheme that has transferred to the PPF, it also applies to a section of a scheme if the whole scheme did not transfer to the PPF. A final amendment changes the commencement provision for the Virgin Media remedy so that it would come into force on the day on which the bill receives royal assent, rather than two months later, which is perhaps an indication that the timetable for royal assent has slipped by a couple of months.
- It is five years since the pledge to combat pension scams campaign was launched. Paul Sweeney, The Pension Scams Action Group Intelligence Business Lead, encourages more organisations to sign up to the pledge and for existing signatories to self-certify that they are turning their commitment into action. He reminds trustees and administrators that they play a crucial role in protecting pension savers.
- The Pensions Administration Standards Association (PASA) has published the first in a new three-part practical guidance series on delivering digital transformation. It outlines how pension schemes can establish the right frameworks, technologies and cultural mindset to ensure successful and sustainable digital change.
- For those directors of corporate trustees who have not yet verified their identity with Companies House, there is new guidance on how to verify your identity at the post office. Note, however, that the first stage still requires an individual to start the verification process on GOV.UK One Login. You can still complete the whole process online if you prefer. You can now check your own personal deadline for verifying your identity by searching against your own name at Companies House.
- Have you seen our Winter Hot Topics in pensions? It is packed with festive fun as well as topical items for your trustee and corporate agenda.
If you would like specific advice on any of these issues or anything else, please contact a member of our Pensions team.