Pensions Bulletin – October 2024

New developments on Collective Defined Contribution (CDC) provision

On 8 October 2024, the DWP launched a consultation on draft regulations to extend Collective Defined Contribution (CDC) provision to unconnected employers. The consultation closes on 19 November 2024 and can be found here. It is anticipated that the draft regulations extending the current CDC framework will be laid before Parliament in 2025. 

The consultation follows fast on the heels of the establishment of the first ever single-employer CDC scheme, by Royal Mail, On 7 October 2024. It is hoped that the enactment of the draft regulations would open CDCs to unconnected employers of all sizes, including the self-employed, and industry-wide employer groups. The consultation also focuses on the authorisation requirements for existing schemes, such as whole life multi-employer schemes and master trusts.

Publication of HMRC Lifetime Allowance regulations

As mentioned in the September edition of our pensions bulletin, HMRC has now issued two further sets of regulations designed to ensure the legislation operates as it should in light of the abolition of the Lifetime Allowance with effect from 6 April 2024. Although the regulations are due to come into force from 18 November 2024 they will be effective for the tax year 2024/25 (so from 6 April 2024) and for subsequent tax years. The provisions are complex and cover issues relating to overseas transfers to QROPS, extensions to certain information requirements and to particular tax protections. The regulations (including the explanatory memoranda that outline the changes being made) can be found here and here. 

The Pensions Ombudsman (TPO) launches new expedited decision-making process

Following positive results from its summer pilot, TPO will fully launch its expedited decision-making process this November.

Last year, TPO started a “root and branch” review of its operating model with the goal of achieving earlier resolution of complaints. One key initiative was to pilot an expedited decision-making process designed for cases with “clear outcomes”, where all information was provided in the application thus removing the need for extended correspondence with parties.

Under the new process, a caseworker reviews the application and offers an initial “short form” view for parties to comment on. Should any party disagree with the caseworker’s view, the matter can be referred to TPO who can make a final and binding determination if TPO agrees with the caseworker’s view, without the need to go through the adjudication process. Detailed information about this process can be found on TPO’s website.

TPO likens this streamlined method to court summary judgements, the aim being to bypass lengthy adjudications, resulting in faster resolutions and shorter Determinations. It explains that the pilot saw very few of the caseworkers’ decisions being referred for Determination by either party. TPO hopes the process will cut wait times for complainants by as much as 18 months, and allow it to focus its resources on complex cases.

Notably, Expedited Determinations will not normally be published but TPO is looking at ways that ‘industry-wide learnings’ can be shared e.g., through case studies.

TPO points out, however, that its work on its operating model is not done yet particularly given a higher-than-expected influx of new complaints – currently 24% above that forecasted. 

Professional Trustees – The Pensions Regulator (TPR) and conflicts 

As part of its move towards more risk based regulation, TPR has announced plans to extend its regulatory approach with professional trustee firms, hoping to form links with the ten largest (which do not appear to have been named) before Christmas. Its approach will focus on understanding more about their business risks and opportunities and also conflicts (perceived or real). That, in turn, may include looking at ownership structures, skills and experience, how able they are to cover the diversity element of equity, diversity and inclusion, and fees. TPR is hoping trustees will engage receptively and deal with questions with ‘candour and honesty’. A key area is also that of sole trusteeships which TPR notes are becoming more common especially with smaller schemes.

Once the first phase of its engagement is complete TPR hopes to feedback and highlight any areas of concern. 

Professional trusteeships play a key role in pension scheme management but are also clearly attracting greater regulatory interest. As such firms grow, particularly in terms of service offerings, they will need to be especially mindful of possible conflict issues. A recent decision, where the Court of Protection held that the appointment of an asset management company which was in the same group as the trust corporation that managed the protected person’s funds clearly breached the duty to avoid conflicts, is relevant to professional trustees’ ability to appoint related professional service providers to their schemes and potential conflicts should always be considered, taking professional advice where necessary.