Pensions: DC trustee agenda update - February 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 anyI HT 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. of its new processes for the resolution of 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.

Save the date: Pensions Academy Online

Our next Pensions Academy Online webinars will take place on Tuesday March 11 and Thursday March 13, 2025. Each webinar begins at 9.30am and will last approximately one hour. Invitations will follow shortly for:

• Cyber risks and mitigations in the pensions world – Tuesday March 11: members of our specialist cyber team will share insights on mitigating the risks (and, in the worst case scenario, dealing with the aftermath) of cyber breaches. How can pension scheme trustees be better equipped to deal with this pervasive and ever-evolving threat?
• Legal update – Thursday March 13: we’ll round up all the latest developments and outline what’s on the pensions horizon.

Watch this space

• Pensions Investment Review 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. A decision on whether to include these measures in the upcoming Pension Schemes Bill will be made following the consultation process.

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