Pensions: Joint DB & DC trustee agenda update - August 2023

Welcome to our monthly update on current legal issues for trustees of DB and hybrid 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 DC-only briefing. 

Court ruling on amending contracted-out schemes NEW

The High Court has considered the impact of a scheme that was contracted-out on the reference scheme (RST) basis failing to obtain an actuarial confirmation prior to an amendment (which was a requirement at the relevant time): Virgin Media Ltd v NTL Pension Trustees II and Others (read more).

The judge held that: (i) an amendment was void where it was introduced without the required confirmation; (ii) this applied to amendments to relevant rights already accrued at the time of the amendment and future service rights accrued afterwards; and (iii) the failure to obtain the actuarial confirmation voided all relevant alterations, not only those with an adverse effect.

ACTION: In some circumstances, schemes that were contracted-out on the RST basis may want to consider reviewing evidence of the necessary confirmation for past changes. However, leave to appeal has been granted, so most schemes may prefer to await future developments.

Mansion House reforms NEW

The government has published a raft of documents after the Chancellor announced pension reforms as part of his Mansion House speech (read more). The documents included calls for evidence on trustee skills, capability and culture, and options for DB schemes; responses and further consultations on choices in decumulation and the proliferation of small pots; and consultation responses on the new value for money framework, extending opportunities for CDC schemes and DB superfunds.

The deadline for input on the calls for evidence and consultations is 5 September 2023 and final decisions on the various proposals will be made ahead of the Autumn Statement later this year.

ACTION: Review / ask for training on the proposals and consider whether you would like to respond to the calls for evidence and / or consultations.

Dashboards update UPDATED

Regulations have been laid before Parliament setting 31 October 2026 as the new dashboards connection deadline for all schemes. A staging timeline for connection will be set out in guidance, rather than legislation (read more).

The Pensions Regulator (TPR) has updated its guidance to reflect the revised connection timetable and set out its expectations of schemes in complying with the requirement to have regard to the staging deadline (read more). It has also published a blog post encouraging schemes to focus on data readiness (read more).

An Act preventing trustees from using pension scheme assets to indemnify themselves against penalties imposed by TPR for breach of the dashboards requirements has received royal assent (read more).

ACTION: Continue preparation for pensions dashboards, in line with the guidance. Seek advice on liability protections.

TPR blog post on protecting DC savers from economic volatility

TPR has published a blog post on supporting DC savers through the current economic environment (read more).

ACTION: Read the blog post and consider whether any changes are needed to support your DC members.

TPR guidance on employers in distress

TPR has published refreshed guidance on dealing with employers in distress (read more) and encouraged trustees to revisit the guidance and remain vigilant to current challenges.

ACTION: Ensure your approach on employer covenant is in line with the guidance.

TPR annual funding statement

TPR’s latest annual funding statement asks schemes to revisit funding strategies in light of recent funding changes (read more). The statement is relevant to all DB schemes but especially those with valuation dates between 22 September 2022 and 21 September 2023, as well as schemes undergoing significant changes or being asked to reduce contributions, change contingent asset arrangements or consider other uses of surplus. TPR has also published its analysis supporting the funding statement (read more).

ACTION: Review the statement and consider whether any changes are required to your scheme’s funding strategy or processes.

TPR guidance on leveraged LDI

TPR has published guidance for trustees on leveraged liability-driven investments (LDI) (read more). The guidance discusses collateral buffers and the steps that trustees should be taking in relation to LDI investment.

ACTION: Consider your scheme’s LDI approach in line with the guidance.

Watch this space

  • TPR’s new corporate plan indicates that the launch of the new DB funding code and regulatory framework has been postponed to April 2024 (read more).
  • The government has consulted on changes to the notifiable events regime. There is currently no revised date for the delayed regulations (read more).
  • TPR has consulted on its proposed single code of practice (to be known as the General Code): watch our webinar on the proposals and read TPR’s interim response. Publication of the revised version of the code is expected soon.

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Content Disclaimer
This content was originally published by Allen & Overy before the A&O Shearman merger