Pensions: what's new this week - 19 February 2024

Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of workplace pensions. This week we cover the following topics: HMRC lifetime allowance guidance newsletter; PLSA stewardship and voting guidelines 2024; HMRC: guidance on the 2024/25 scheme return and information requirements; Court of Appeal dismisses appeal on interpretation issues in the Railways Pension Scheme; Next Pensions Academy Online: 5 and 7 March 2024, 9.30-10.30am.

HMRC lifetime allowance guidance newsletter

HMRC’s latest newsletter on the abolition of the lifetime allowance is largely in FAQ format, covering various specific issues put to HMRC. It also includes commentary on transitional tax-free amount certificates – this is a means by which members can ensure that the amount of any tax-free lump sum they have taken prior to 6 April 2024 is taken into account accurately on future relevant benefit crystallisation events (rather than relying on the default assumption that 25% of any relevant value crystallised was taken as a tax-free lump sum). HMRC emphasises that this is not a means for members to compare whether they are better off on the default basis or with a certificate – once a certificate has been granted, it is not possible to revert to the standard calculation.

Another point of interest is on the requirement for statements to be sent to members who would not otherwise receive one in the 2024/25 tax year. This one-off reporting requirement applies to members (or personal representatives of deceased members) with uncrystallised rights in the scheme who do not have an actual entitlement to be paid a pension. The statement must include the percentage of the member’s LTA available immediately before 6 April 2024 and must be issued by 5 April 2025 – a potentially significant administrative exercise to be completed in the first year of the new arrangements. After this one-off requirement, no further statement is required until a relevant benefit crystallisation event occurs.

HMRC also confirms proposed changes to the legislation for the pension commencement excess lump sum (PCELS): the ‘permitted maximum’ for the PCELS will be removed (so a lump sum will not be tested against the member’s remaining lump sum and death benefit allowance (LSDBA) to determine whether it can be paid as a PCELS). A member will have to have exhausted either their lump sum allowance or their LSDBA (for example by becoming entitled to a serious ill-health lump sum) to be eligible for a PCELS.

Read the newsletter.

PLSA stewardship and voting guidelines 2024

The Pensions and Lifetime Savings Association has published its latest Stewardship and Voting Guidelines for pension scheme trustees, which for the first time includes a section on social factors (including health and safety in supply chains, modern slavery and other matters), together with material on other key themes including:

  • biodiversity, stressing the need to consider biodiversity loss at a comparable level of importance to climate change;
  • cybersecurity, highlighting the need to review corporate disclosures on cybersecurity risk and mitigation strategies as well as the management of breach responses; and 
  • the impact of AI, covering opportunities and risks in the development and deployment of artificial intelligence, including in the employment space.

The guidelines include an appendix summarising the PLSA’s voting recommendations.

Read the guidelines.

HMRC: guidance on the 2024/25 scheme return and information requirements

HMRC has published information about changes to the 2024/25 scheme return and process for scheme administrators. From 6 April 2025 these must be filed via the Managing Pension Schemes service and the returns will ask for more, and different, information than previously. Lists of the information required for both the standard pension scheme return and the SIPP scheme return are provided to enable scheme administrators of relevant schemes to ensure that they collate the necessary information for the 2024/25 tax year.

Read the guidance.

Court of Appeal dismisses appeal on interpretation issues in the Railways Pension Scheme

The Court of Appeal has dismissed an appeal concerning the interpretation of certain provisions in a scheme’s rules: Railways Pension Trustee Company Ltd v Atos IT Services UK Ltd and another. The issues in the case were scheme-specific, but some of the reasoning on interpretation may be relevant to other schemes.

The decision relates to the Atos Section, one of more than 100 separately-ringfenced sections of the Railways Pension Scheme. The Atos Section was closed to new entrants in 1999 (except where a member was a ‘protected person’ under rules put in place at privatisation and the employer was therefore obliged to provide RPS membership). As a result, by 2022 the Section had only a small number of active members. The RPS has shared cost arrangements in place under which contributions are normally payable by participating employers and active members in a ratio of 60:40.

The High Court had previously ruled on a series of questions about the interpretation of rules requiring members and employers to make contributions where there was a funding shortfall. The Court of Appeal has broadly upheld the High Court’s conclusions. In particular, it held that where the rules stated that issues (such as increases to contribution levels) were specified to be ‘as determined by the actuary’, this allowed for an exercise of judgment and an element of discretion (which the Court of Appeal referred to as an exercise of professional judgment, rather than a pure discretion); and that reference in the rules to arrangements to ‘make good’ a shortfall did not require that the shortfall must be eliminated.

Read the decision.

Next Pensions Academy Online: 5 and 7 March 2024, 9.30-10.30am

Pensions Academy is back for 2024, with two webinars on topical issues for pension schemes and the people who run them:

Legal update: a year of change – Helen Powell, Francesca Parnell and Myles Cormack – Tuesday 5 March

There’s been a stop/start feel to pensions developments over the last few years but now it’s all go! With the General Code due to go live at the end of March, big changes to pensions taxation in April and the DB Funding Code on the way, we won’t be short of things to talk about. Join Helen, Francesca and Myles for a guide to what’s changing in 2024.

Not just IDR? Trustee involvement in disputes and litigation – Andy Cork and Jason Shaw – Thursday 7 March

Trustees may find themselves involved in various forms of dispute or litigation. As well as the usual scheme dispute resolution procedures and the Pensions Ombudsman, we’re seeing an increase in members bringing complaints outside the normal channels. Andy and Jason will look at some of the common ways trustees might be involved in litigation, including county court litigation with members, and also consider the recent developments in recouping overpaid pensions and how trustees might now handle disputes about recovering overpayments.

If you would like to attend either or both of the sessions, please sign up here.


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