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Pensions: DC trustee agenda update - November 2024

Welcome to our monthly update on current legal issues for trustees of DC pension schemes, designed to help you stay up to date with key developments between trustee meetings and to support the legal update item on your next trustee agenda. We also have a separate update for DB/hybrid schemes.

Abolition of LTA: further regulations

Two further sets of regulations will come into effect in November, making technical changes in relation to the abolition of the lifetime allowance to ensure that the new framework operates as intended. Both sets of regulations will have effect for the tax year 2024/25 and subsequent tax years.

Action: Ensure that processes and, where appropriate, communications are updated in line with the new regulations.

TPO: expedited decision-making processes

The Pensions Ombudsman (TPO) has announced that complainants can no longer use its Early Resolution Service as an alternative to their scheme’s internal dispute resolution procedure, and has published a factsheet setting out wording that can be used to signpost members to its services.

TPO has also now published further details of its expedited decision-making approach and processes.

Action: Note the changes in TPO processes; update standard communications as appropriate.

TPR commentary on ESG matters

TPR has published a market oversight report setting out findings from its review of how pension scheme trustees are complying with their ESG duties, based on a review of statements of investment principles (SIPs) and implementation statements.

TPR is encouraging trustees to go beyond minimum compliance – for example, providing more detail on voting activity and on wider ESG considerations, such as nature loss and social factors.

TPR has also brought together a range of existing guidance and resources on a new landing page to support trustees in meeting its expectation of continuous improvement in this area.

Action: Read the report and consider any potential further actions in this area.

Proposed VFM framework: FCA consultation

The Financial Conduct Authority (FCA) has consulted on a value for money (VFM) framework for savers in DC default arrangements. The government intends to apply equivalent measures to trust-based schemes in due course.

The proposed framework has four key aspects – measurement of investment performance, costs and service quality against specified metrics; assessment of performance against other arrangements on a consistent and objective basis; disclosure of assessment outcomes; and action to improve schemes that do not provide VFM.

Action: Keep a watching brief as proposals are developed for trust-based DC schemes.

Pensions dashboards update

The Pensions Regulator has published its pensions dashboards compliance and enforcement policy and has again urged trustees to be prepared in good time to comply with their dashboards duties. TPR plans to take a pragmatic approach to enforcement save in cases of wilful or reckless non-compliance, and will focus on the quality of scheme data, robust internal scheme governance, and connection compliance. The policy includes illustrative scenarios of how TPR might deal with breach situations.

Action: Review the policy and check that steps are in place to maintain an audit trail of your preparations for dashboards compliance.

Watch this space

  • The forthcoming Pension Schemes Bill is due to cover measures including the automatic consolidation of deferred DC small pots and the introduction of a standardised VFM test for DC schemes. It will also introduce duties for trustees to offer decumulation options to members and will remove the need to apply to the County Court to enforce the recovery of an overpayment following a TPO decision.

Have your say

The government is consulting on extending the framework for collective defined contribution (CDC) provision to include non-associated multiple employer CDC schemes. The consultation closes on November 19, 2024.

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