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Introduction
It's not often – thankfully – that we cover three new Acts of Parliament in a single Planner. But such is the case here. The Government has legislated for two major changes to pensions tax, covering death benefits (from April 2027) and salary sacrifice (April 2029). And then there's the Pension Schemes Act. Following Government concessions on mandation, the most important pensions Bill for 20 years was agreed by the House of Lords on 28 April, just hours before Parliament was prorogued.
With the Act now on the statute book, attention will turn to the regulations needed to implement its provisions. For many DB schemes, the focus will be surplus sharing. Section 9 of the Act will in due course allow trustees to make refunds from ongoing schemes, but the associated conditions have yet to be prescribed. The funding test will be key; we will learn soon whether the Government will opt for a "low-dependency" yardstick, as it was minded to do in 2025. Developments reported in this Planner give a feel for materiality. The Pensions Regulator estimates that 80% of schemes are fully-funded on a low-dependency basis, with 60% funded at more than 110%. Also noteworthy is the recent HSBC case, as to the use of DB funds for DC provision: the relevant surplus, on a low-risk funding basis, was reckoned to be £2.8bn.
For DC schemes, the Act provides for major reforms, aimed in particular at driving consolidation. Among other things, master trusts and GPPs will be subject to a £25bn "minimum size" requirement. The reforms are some way off as yet – "minimum size" is not due to launch until 2030 – but the Government and regulators are already seeking to steer industry behaviours. We cover two examples in this Planner. TPR has urged own-trust schemes to consider whether they will be able to meet future requirements, and to consolidate in cases where members would fare better under a collective arrangement. Meanwhile the Department for Work and Pensions has published guidance which seeks to manage "planning blight" for sub-scale master trusts and GPPs. Bigger may in principle be better, but the Government wants to avoid excessive consolidation, which might adversely affect choice and competition.
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