Autumn Statement: a bumper day for pensions

United Kingdom

After a quiet King’s Speech for pensions, there was plenty of content to make up for it in today’s Autumn Statement, with the Chancellor of the Exchequer announcing a raft of new pension measures and consultations.  Whilst very little is changing immediately, trustees and employers will need to keep a close eye on the progress of these measures over the coming months.

What did the Chancellor have to say?

The Autumn Statement is designed to increase private sector investment by £20bn per year, and pension funds have a role to play. The Chancellor looked to build on this summer’s Mansion House reform announcements, which aim to increase the flow of capital to growth companies whilst improving pension saver outcomes.

The most eye-catching new proposal was perhaps the “pot for life”: giving individuals a legal right to require their new employer to pay pension contributions into their existing pension pot. The Government is consulting on this “lifetime provider model”, which would be a substantial change from the current position under which employers automatically enrol eligible new staff into a retirement scheme of the employer’s choosing. Alongside it, the Government will introduce a multiple default consolidator model to allow a small number of schemes to act as consolidator for eligible pension pots under £1,000.

A series of other developments were unveiled in the wake of Mansion House:

  • The Government will consult on the PPF acting as public consolidator for schemes which are unattractive to commercial providers, and on enabling 100% PPF coverage for DB schemes that opt to pay an increased levy
  • It will ask for views on whether changes to rules on repayment of surplus could incentivise investment in assets with higher returns (in the meantime, the tax charge on repaying surplus will reduce from 35% to 25% from 6 April 2024)
  • Proceeding with proposals to require occupational pension trustees to offer decumulation services and products at an appropriate quality and price - and to further explore wider use of Collective DC schemes
  • An FCA consultation in spring on the Value for Money Framework for contract-based schemes, with the FCA and TPR working closely to develop consistent rules for trust-based schemes
  • The Government agrees with TPR’s plans to implement a trustee register and to update the Trustee Toolkit to include further information on productive finance
  • Further engagement on shifting employer focus from low fees to long-term pension investment performance, with TPR providing more information for employers on how to choose a pension scheme
  • Guidance for the Local Government Pension Scheme (LGPS) in England and Wales to include a 10% allocation ambition for investments in private equity
  • Additional growth measures trailed yesterday, including committing £250m to the Long-term Investment for Technology and Science (LIFTS) initiative, and a new Growth Fund within the British Business Bank.

DWP has also published a review of Master Trusts which describes how TPR is responding to this evolving market, and areas where the current authorisation regime may need revision.

Last, but certainly not least, the Chancellor confirmed that (despite some industry hopes to the contrary) the Lifetime Allowance (LTA) will be abolished from 6 April 2024 as planned, with legislation to appear in the Autumn Finance Bill. This is likely to involve substantial administrative and communications work from schemes in the coming months.

Next steps

Trustees of occupational pension schemes already have a lot to contend with. We await a swathe of previously announced initiatives such as the finalisation of new Funding and Investment Regulations; the roll-out of pensions dashboards; and the extensive TPR General Code of Practice.

Today’s announcements on pension fund reform add yet more to the trustee inbox: it looks like trustees, employers and advisers should prepare for a busy 2024. CMS will keep you up to date with developments.

The Autumn Statement can be found here.