Pensions: DC trustee agenda update - January 2025

Budget 2024: IHT and pensions

The chancellor announced in her Budget Speech that from April 6, 2027, unused DC pots and lump sum death benefits will be included within a member’s estate for inheritance tax (IHT) purposes. Scheme administrators will be liable for reporting and paying any IHT due to HMRC, and a technical consultation has been published on how this would work. At present it is understood that life policy products will remain outside the scope of IHT but further details remain to be clarified.

The chancellor also announced changes relating to overseas transfers – in particular, the withdrawal of the exemption from the Overseas Transfer Charge that previously applied where transfers were made to a scheme established in the EEA and Gibraltar.

Action: Keep a watching brief on the development of the IHT and other changes; review any relevant wording in member communications.

Changes to Ombudsman processes

Following the withdrawal of its Early Resolution Service, the Pensions Ombudsman has published details of its new processes for the resolution of pensions disputes, together with a blog post providing additional commentary.

Incoming complaints are assessed for suitability for informal resolution by agreement between the parties – these will be handled by the Resolution Team and other complaints will be directed to either an expedited decision-making process or the more formal adjudication process.

Action: Review TPR’s factsheet and blog post; make any relevant changes to wording about the early resolution service.

TPR: ESG resources

The Pensions Regulator has brought together a range of resources aimed at helping trustees to go beyond minimum compliance and embed environmental, social and governance (ESG) matters in every area of scheme decision-making.

The new ESG landing page brings together TPR’s existing ESG and climate material, comprising Code of Practice modules on climate change and stewardship, existing guidance on climate-related governance and reporting, and investment guidance. The page also includes links to reports on TPR’s own ESG-related activities and a range of external resources.

Action: Review TPR’s resources and consider any implications for your scheme’s ESG and climate disclosures.

Watch this space

• The forthcoming Pension Schemes Bill is due to cover measures including the automatic consolidation of deferred DC small pots and the introduction of a standardised Value for Money test for DC schemes. It will also introduce duties for trustees to offer decumulation options to members and will remove the need to apply to the County Court to enforce the recovery of an overpayment following a TPO decision.
• Following November’s Mansion House Speech, the government has published an interim report from its Pensions Investment Review, together with a consultation on new proposals for accelerating consolidation in the DC market. The headline proposals are that master trusts and GPPs used for auto-enrolment should have a maximum number of defaults and that these should operate at a minimum size. The government is also seeking views on the introduction of new duties for employers to specifically consider the value that is provided by the pension arrangements for their staff. The consultation closes on January 16, 2025. A decision on whether to include these measures in the upcoming Pension Schemes Bill will be made following the consultation

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