In the latest edition of our Taylor Wessing Pensions Bulletin we give a snapshot of some of the latest pensions developments below.

Please get in touch with your usual Taylor Wessing pensions contact if you would like to discuss anything you have seen in the Bulletin.

Pension overpayments

County Court judgment needed for trustees to enforce recoupment of disputed amounts

Where trustees seek recoupment of overpaid benefits by deducting the relevant amounts from future payments to the member who has received the overpayment then, where there is a dispute as to the amount owing, the trustees cannot make any deductions unless a 'competent court' has decided that that is enforceable.    In an earlier decision it was suggested that the Pensions Ombudsman (PO) was not a 'competent court' for this purpose but some ambiguity was left because the suggestion did not for part of the formal decision and so was not binding.   This point was therefore tested in a recent case (The Pensions Ombudsman v CMG Pension Trustees Limited and CGI IT UK Limited (Court of Appeal)) which confirmed that indeed the PO is not a 'competent court' for this purpose. What that means is that trustees will need to obtain a County Court judgment before exercising recoupment in these circumstances (a PO decision in their favour would not be sufficient, though this case also confirms that the County Court would not need to re-hear the whole case again).

Pension scheme surpluses

We reported in our October bulletin on a recent case where the Pensions Ombudsman rejected a complaint against a decision made by the Trustee of the Water Companies Pension Scheme to repay surplus of the Bristol Water Section of their Scheme to the employer in full.  The determination reinforces the need for procedural correctness in making and documenting trustee decisions.  A full report on the case can now be found here. 

Autumn Statement 2023

Pensions was central to the Autumn Statement on 22 November and, while the areas covered were not a surprise, having been part of the 'Mansion House' proposals earlier this year, it is worth noting that the Government is proposing to address a real breadth of issues in what looks like a very ambitious timetable. With a general election due to take place next year, it remains to be seen which measures will make it past the line in time and which carry enough universal support to survive any change of government. If implemented, the proposals look set to have a significant impact on both DB and DC pension schemes.  The key aspects are set out below, but as ever the devil will be in the detail.

Surplus extraction from DB pension schemes

The DWP is to consult ' this winter' on an appropriate regime under which surpluses can be repaid to the employer. The authorised surplus payments charge (currently 35%) will be reduced to 25 % from 6 April 2024.

Our comment: Given that the main rate of corporation tax is currently 25% the reduction in the authorised surplus payments charge seems a sensible first step.

Consolidation – a new role for the PPF

Already raised in a call for evidence earlier this year, the DWP has confirmed it is to consult on the possibility of DB pension schemes currently unserved in the current market and 'unattractive' to commercial consolidators to be able to consolidate into a statutory vehicle run by the PPF.

Our comment: Of particular interest will be the qualifying conditions for schemes to enter this arrangement and how this will be structured in the PPF (where there will presumably be some protections for current levy payers to avoid the risk of cross subsidy). This may prove a really helpful development for smaller schemes which struggle to find an insurer but are faced with an increasing governance burden (and cost) should they be forced to run on.

New investment vehicles

Subject to final agreement the Government is to commit funds to creating new investment vehicles 'tailored to the needs of pension schemes, seeking to generate over a billion pounds on investment to support UK's most promising science and technology businesses'. The Government is also to establish a 'Growth Fund' within the British Business Bank which is designed to give pension schemes access to investment in UK's 'most promising businesses'.

Our comment: The extent to which trustees will be willing to invest in these sorts of arrangements will depend on whether they are satisfied that doing so is consistent with their fiduciary duties and any related legal changes that may be made to encourage investment of this type.

DC pensions - other

There are also a number of further measures affecting DC pensions, including an increased focus on decumulation services by pension schemes at an 'appropriate quality and price' for savers accessing their pensions.  This will include looking at the wider use of CDC arrangements.

'Small pots' – choice of a 'provider for life' and consolidation options

The Government has published its response to its consultation on the possible solutions to the issues around multiple 'small pots' that employees accumulate, especially if they change jobs on a frequent basis. There is now a call for evidence on:

• the possibility of having a 'lifetime provider model' whereby pension savers can have one pension pot for life;
• an expanded role for collective defined contribution pension schemes; and 
• the introduction of a multiple default consolidator model which will allow certain authorised schemes to act as a consolidator for eligible pension pots of under £1000.

Our comment: there is much to be considered here.  Any new model will undoubtedly impact pension scheme administration systems for existing schemes.  Members will need much support in making appropriate choices in relation to their 'chosen' pension arrangement, and employers will be concerned about implementation issues (including any possible liability they may have as a result).

Abolition of the Lifetime Allowance (LTA) 

Lastly, the Government has confirmed it will legislate to remove the LTA in the Autumn Finance Bill 2023.  This will clarify the taxation of lump sums, lump sum death benefits and the application of protections and tax treatment of overseas pensions, transitional and reporting requirements. Despite speculation that the timing would be pushed back the Government has confirmed these provisions will take effect from 6 April 2024.  There are still elements that are outstanding, such as details on certain transitional provisions – more may become apparent as the Finance Bill, which contains the legislative framework, progresses through Parliament.