In the July edition of our Taylor Wessing Pensions Bulletin, we give a snapshot of some of the many recent pensions developments, which include:
Government announces Pensions Commission revival to consider the long term future of the pensions system
The Government has announced the revival of the Pensions Commission, which last reported in 2006 and whose findings were significant in the introduction of auto enrolment. The Pension Commission is to consider the long-term future of the pensions system to 'make today's workers better off in retirement'. It will work closely with stakeholders such as the CBI and the TUC and will:
- make proposals for change beyond the current Parliament to deliver a pensions framework that is 'strong, fair and sustainable'
- build on the Investment Review and the Pension Schemes Bill (more on the latter can be found in our last pensions bulletin here) and will
- look at the complex barriers stopping people from saving enough for retirement.
The Government has also launched a state pension age review (as required by law) commissioning two reports, one on the factors to consider relating to State Pension Age and the other to report on the proportion of adult life in retirement.
The announcement is set against a backdrop of new analysis that indicates that retirement income look set to fall over the next few decades if nothing changes, with a notable pensions gender gap and certain societal groups not saving into a pension at all.
With the Pensions Commission set to report in 2027, there will be a long wait before we see any concrete measures emerge from it. We will report any developments on this as they emerge.
HMRC issues response to consultation on inheritance tax (IHT) changes
HMRC has published its response to a consultation on proposed changes to the inheritance tax treatment of pension death benefits which were announced in the Budget last year (see here for more details of the proposals). The main points emerging from the consultation response are that:
- It will be Personal Representatives (PRs) not pension scheme administrators (PSAs) (which includes scheme trustees) who will be liable to report and pay Inheritance Tax on any unused pension funds and death benefits from 6 April 2027. The response document sets out at a framework for information sharing between PRs and PSAs for the exchange of all necessary information for inheritance and income tax due, if any. The Government will consult on the legislation covering this in 'due course'.
- Recognising certain anomalies identified in the original consultation, the response confirms that all death in service benefits payable from a registered pension scheme, whether discretionary or not, will be out of scope for IHT purposes.
The confirmation as to who will be responsible for accounting for IHT in these circumstances and other clarifications are welcomed. It will be crucial for trustees and administrators to understand their obligations around information flow and timeframes. We will monitor this and report in our updates, as the detail is released.
Climate change – transition plans and TPR developments
The Government will be reviewing the Occupational Pension Schemes (Climate Change, Governance and Reporting) Regulations 2021 based on evidence provided by The Pensions Regulator (TPR) , which will look at the current regime and the potential next steps for climate change reports.
TPR will assess the practicalities of transition plans for pension schemes. It is setting up a new group of TPR and industry representatives to test a voluntary net zero transition template which is suitable for occupational pension schemes (see here for more details). Julian Lyne, TPR's interim executive director, will chair the working group and has said that sustainability initiatives should help improve investment governance practices and help schemes make good long term strategic decisions.
Although currently not mandatory, the consultation proposes that transition plans could become so, along with a requirement to publish them. References to making transition plans mandatory for the financial services sector and FTSE 100 companies were included in the Labour manifesto in 2024, which gives an indication of the direction of travel. We will monitor any developments on this and report in our updates.
PLSA in now Pensions UK
The Pensions and Lifetime Savings Association (PLSA) has now re-branded itself as Pensions UK reflecting 'the sector's entry into a defining period of structural change.' It is said to be aimed at preparing the pensions industry and the wider pensions system for the future ensuring that pensions systems provide adequate retirement incomes for savers that are affordable and fair. It has published its ten year strategy and a report called '2030 Ready' highlighting the changes among the sector and societal context influencing the relationship between savers and their pensions. We continue to support this work through our connections with Pensions UK (senior associate, Afshan Mallik is on the committee of the Pensions UK Hertfordshire group, and senior counsel, Angela Sharma is vice-chair of the London group).
