In the November edition of our Taylor Wessing Pensions Bulletin, we give a snapshot of some of the many recent pensions developments, which include:
Boxclever and financial support directions – lessons learnt
The Pensions Regulator (TPR) has published a regulatory intervention report about its pursuit of ITV and four associated companies (the Targets) to provide financial support in relation to the Boxclever Group Pension Scheme (Boxclever Scheme). In short, TPR investigated Boxclever (the principal employer of the Boxclever Scheme and a joint venture between Granada (now ITV) and Thorn) following the failure of the Boxclever business. The Targets unsuccessfully challenged the imposition of financial support directions (FSDs) on them by TPR through much litigation. Following unresolved discussions with TPR about the level of support required, TPR issued a contribution notice on the Targets for the full buy out deficit, this being the first time it had issued such a notice for failure to comply with a FSD.
TPR ultimately reached a settlement with the Targets in the Summer of 2024 which means that all Boxclever Scheme members will receive full benefits (with any who have been receiving Pension Protection Fund (PPF) level benefits receiving back payments and interest) following a bulk transfer to an ITV sponsored scheme. The report highlights the importance of the case in the various issues that were explored throughout the litigation. For example, at the substantive Upper Tribunal hearing in January 2018, when challenging the FSDs the important issues raised included (amongst others) whether the association and connection test was met, questions around retrospectivity and the relevance of events prior to the Pensions Act 2004 coming into effect, the relationship between the Targets and the Boxclever Scheme and its employer and the conduct of the trustees. Further on appeal to the Court of Appeal, the report highlights that the main issues considered were whether the associated and connection test was met, retrospectivity and the events occurring before the introduction of the Pensions Act 2004 and whether or not the Upper Tribunal's approach to reasonableness was legally flawed.
TPR also says that this matter shows that it will pursue lengthy and complex litigation to protect savers but that it will also remain open to settlement discussions at any time and will accept a settlement offer if it 'achieves a good outcome for the scheme'.
As TPR says in its report, it is useful for trustees, employers and advisers because this was the first substantive case heard at both the Upper Tribunal and Court of Appeal regarding TPR's anti-avoidance FSD powers and provides helpful guidance on the application of those powers.
Pension Protection Fund publishes consultation on 26/27 levy
The Pension Protection Fund (PPF) has published its consultation on its levy for 26/27, confirming its proposals for a zero PPF levy for 'conventional' schemes, which is dependent on the remaining passage of levy measures in Pension Schemes Bill (with some flexibility which should still allow a zero levy provided the levy provisions in the Bill remain appropriate and progress sufficiently through the remaining stages).
The consultation confirms the PPF’s intent to continue to charge an ACS (Alternative Covenant Schemes) levy, reflecting these schemes pose different risks to conventional schemes but it has proposed refinements to further improve the ACS levy calculation for next year. The PPF has also set out its intention to carry out a wider review of the ACS levy methodology in the medium term to inform how the PPF's approach may need to further adapt to reflect market developments.
The consultation closes on 5 January 2026, with final rules expected in early 2026 (the rules must be set before 31 March 2026).
The prospect of a zero levy will be further welcome news for DB pension schemes and follows the announcement of a zero levy for the 25/26 year also as mentioned in our previous bulletin here.
Association of Professional Pension Trustees updates its code for professional corporate sole trustees
The Association of Professional Pension Trustees (APPT) has updated its code of practice for professional corporate sole trustees which will be effective from 1 January 2026 to 'allow firms to update their processes and procedures.' Building on the original version that was introduced in 2021, the APPT says that the new version of the code is in line with updates to the Standards for Professional Trustees of Occupational Pension Schemes (in particular schedule 3 which sets out the additional standards that apply to professional trustees who act as sole trustee), the APPT Change of Professional Pension Trustees Guidance Note and The Pensions Regulator updated guidance and codes.
Welcoming the update, the Pensions Management Institute (PMI) has said that it will incorporate the revised code into its trustee accreditation process.
More broadly, a Government consultation on scheme governance, including trusteeship, is expected this year.
Pensions Administration Standards Association issues guidance about the use of AI in pensions administration
With the increasing use of artificial intelligence (AI) in pensions administration, the Pensions Administration Standards Association (PASA) has issued guidance on this recognising that AI holds significant potential for transforming pensions administration but also introduces unprecedented risks and challenges which need to be carefully managed to safeguard saver interests and maintain trust.
The guidance aims to:
- remind the reader that AI requires high quality data
- provide practical examples of how AI is being/could be deployed in administration
- outline the necessary measures to mitigate the risks associated with AI deployment in administration with actions trustees can take to understand how AI is being used for their schemes.
The guidance helpfully includes important risk management considerations, together with key actions for trustees. For example, it suggests that in understanding AI capabilities and limitations, trustees should ask their administrators to set out their key considerations in assessing the AI technologies they are deploying including capabilities and limitations (with trustees being mindful of where the focus is only on benefits and not also limitations). Other areas discussed include ensuring data privacy and security, mitigating data bias and discrimination, decision making transparency, human review and oversight and scheme specific AI applications.
The guide is a useful tool for trustees on how to navigate this rapidly developing area and manage the risks and opportunities that implementing AI gives rise to for their schemes.
Updates to The Pensions Regulator scheme return questions for defined benefit and hybrid schemes
The Pensions Regulator (TPR) has added some additional questions to scheme returns for defined benefit (DB) and hybrid schemes which must be completed by 31 March 2026 (with scheme return notices being sent out early that year). These cover the following areas:
- New questions about liquidity and leverage: contingency planning for leveraged liability-driven investments (LDI) arrangements.
TPR is seeking greater insight into how schemes with leveraged LDI arrangements prepare for collateral calls under extreme market conditions. Schemes will be asked to provide details of pre-agreed asset sale plans, which may take the form of a single fund, a pre-defined portfolio, or a ranking structure (also known as a waterfall). They must also specify the asset classes they plan to sell, using various specified categories which include (amongst others) money market funds, UK investment grade corporate bond, gilts and UK equities.
- New asset breakdown question: Enhanced asset breakdown for Tier 3 schemes (broadly those which have at least £1.5 billion in s179 protected liabilities).
Tier 3 schemes will be required to provide a more detailed breakdown of the unquoted and private equity asset class. This will include sub-categories such as venture capital, private equity, and infrastructure equity, along with a UK and non-UK split.
TPR has said that asking for this additional breakdown from the largest schemes will allow it to track how asset allocations and amounts change over time and consider any system-wide effects.
There is also an update for schemes with valuation effective dates from 22 September 2024 in that they will not have to answer the schemes in surplus questions.
TPR has also provided useful reminders for schemes on preparing to complete the returns and making sure that the information required will be available to be able to meet the relevant deadlines, where appropriate. This will help to avoid possible fines and any impacts on Pension Protection Fund (PPF) levy calculations.
The Deputy Pensions Ombudsman's decision about death benefits and reminders about exercising discretions
A recent Deputy Pensions Ombudsman's (DPO) decision is a useful reminder about the importance of appropriate investigation processes when exercising death benefit discretions. In this case, the rules of the policy provided that the death benefit in question (around £61,500) should be paid on a discretionary basis to one or more defined beneficiaries. Upon the death of the member, the provider (who was responsible for exercising the discretion) issued a claim form to the member's son (Mr C) who completed it saying he was the sole beneficiary when in fact the deceased had three other living adult children and a second wife who had been nominated in his expression of wish form. The death benefit was paid in full to Mr C without reference to these other individuals.
Ms N approached the provider after that saying that Mr C had made a fraudulent claim, having suggested to other family members that no monies were due from the policy. She then complained to the Pensions Ombudsman saying, amongst other things, that the provider should have carried out further investigation to identify potential beneficiaries rather than just rely on a form completed by Mr C which took 'minimal effort'. She also queried why Mr C was asked if he had obtained letters of administration but not asked for evidence that he had obtained probate, and why the earlier expression of wish form was not considered as that would have raised questions about him indicating that there were no other beneficiaries. The provider on the other hand said, in line with many providers, that it had a 'streamlined' approach to cases where the benefits were small and they did not wish to cause extra stress in delayed payments for bereaved families. It did not ask to see grants of probate etc because the benefit fell outside the estate for inheritance tax purposes and it was entitled to rely on the information that Mr C had provided – even though he had now been convicted of fraud it was for the other beneficiaries to reclaim the money from him.
In finding in favour of Ms N, the DPO said:
- The provider's need to understand who the potential beneficiaries were was a factual question, not a discretionary one and while a scheme may adopt more proportionate approach and limited investigation where the value of the benefit was low it still had to gather enough information to make fair and rational decisions.
- It was not necessary to exhaustively identify every possible beneficiary but if the range had not been properly considered then the discretion had not been validly exercised. Indeed, where unverified information was being supplied by someone claiming to be a sole beneficiary 'it maybe prudent to consider the possibility of fraud and the need to take extra steps to ensure that proper information is obtained.
- The provider had to take steps to recover the sums paid – it was not for the other potential beneficiaries. It was difficult to see what rights they had against the fraudulent claimant other than enforcing the provider's right of recovery.
The DPO directed the provider to re-take the decision after having gathered enough information about potential beneficiaries; the provider would also need to explain to Ms N how the decision was reached and the factors considered in reaching it.
Though this case may appear extreme (for example, it would seem unusual to not consider an expression of wish form) it is a useful reminder to trustees to take reasonable steps to identify possible beneficiaries in these sorts of cases and to not rule out possible fraud in their considerations.
STOP PRESS: Autumn Budget 2025 pension announcements
Following a flurry of predictions, in the Autumn Budget on 26 November the Chancellor made the following key pension announcements:
- Salary sacrifice for pension contributions – The government will charge employer and employee NICs on pension contributions above £2,000 per annum made via salary sacrifice (ie there will be a cap on pension contributions paid via salary sacrifice that are exempt from national insurance contributions). These changes will be introduced through primary and secondary legislation and will take effect from 6 April 2029.
- Further inflation protection will be introduced in the Pension Protection Fund (PPF) and Financial Assistance Scheme (FAS) by providing CPI-linked increases, capped at 2.5% a year, on pre-1997 pension accruals where the original schemes provided this benefit, from January 2027.
There a number of other measures including:
- (against the backdrop of previously announced IHT changes) those allowing personal representatives (PRs) to direct pension scheme administrators to withhold 50% of taxable benefits for up to 15 months and pay Inheritance Tax due in certain circumstances. Other measures will ensure PRs will be discharged from any liability for payment of inheritance tax on pensions discovered after PRs have received clearance from HMRC (all to take effect from 6 April 2027)
- the introduction of measures to enable well-funded DB pension schemes to pay surplus funds directly to scheme members over the normal minimum pension age, where scheme rules and trustees permit it, from April 2027. The Government is also said to be looking at 'reducing the tax charge on surplus funds paid directly to members' in a DB context.
We will be monitoring the legislation underpinning these measures but clearly employers that use salary sacrifice will need to review their arrangements, including communications, contracts and payroll and may even consider changing their pension arrangements as a whole to streamline administration and simplify their pension offering. We would be happy to assist in any such review if required.
