Here we summarise some recent or ongoing changes in legislation or regulation.
On this page you will find summaries on:
- FCA/DWP - Pensions Act – Pensions Dashboard
- HMRC - Changes to lifetime allowance – 6 April 2024
- HMRC - Increasing the normal minimum pension age
- Consultation on a policy framework to support individuals use their pension savings in decumulation
- Ending the proliferation of small pots
- Pension trustee skills, capability and culture
- Pensions (Extension of Automatic Enrolment) Act 2023
- Sustainability Disclosure requirements
- HMRC Newsletters
FCA/DWP - Pensions Dashboard
The Pensions Act gives the power to the Secretary of State, MAPS or a party appointed by the Secretary of State to create the regulations for Dashboard.
Following on from her announcement in March 2023, Laura Trott, the Parliamentary under Secretary of State for Pensions, issued a further written ministerial statement providing an update on the timeline for connecting to pensions dashboards. The Government has published amending regulations with a new approach to delivery that allows the government to work more collaboratively with the pensions industry - setting out the staging timeline in guidance to be consulted on with industry later this year.
The pensions minister stated “In recognition that the requirement to connect to the digital architecture should remain mandatory, we will include a connection deadline in legislation of 31 October 2026. This is not the Dashboards Available Point – the point at which dashboards will be accessible to the public – which could be earlier than this.”
On 2 November, the Pension Dashboard Programme published its October progress report.
HMRC - Changes to lifetime allowance – 6 April 2024
From 6 April 2024, the lifetime allowance is being removed. This doesn’t mean there are no limits on the amount of pension savings people can take without a tax charge; the lifetime allowance is being replaced by new allowances.
To summarise the main proposed changes-
- The lifetime allowance will be abolished. Tax-free lump sums (including the tax-free elements of lump sums) and tax-free lump sum death benefits will instead be tested against a lifetime limit, set at £1,073,100 (an individual’s ‘lump sum and death benefit allowance’). Any lump sums paid above this level will be taxed at the individual’s or beneficiaries’ marginal rate of income tax.
- Within that overall limit, there will be a tax-free limit for pension commencement lump sums and the tax-free element of an uncrystallised funds pension lump sum, trivial commutation lump sums and winding-up lump sums. This tax-free limit will be known as the ‘lump sum allowance’. This will be set at £268,275 (which is equivalent to 25% of £1,073,100) or any higher protected amount.
Read more in our What is replacing the lifetime allowance from 6 April 2024? article.
HMRC - Increasing the normal minimum pension age
The normal minimum pension age is increasing for most individuals on 6 April 2028 to age 57. This change affects people born after 6 April 1971.
The government originally announced their intention to increase the normal minimum pension age from age 55 to 57 from April 2028 back in July 2014. The legislation required to make the change was included in the Finance Act 2022.
Some individuals have a protected pension age in their pension scheme, which is the right to take benefits before age 57. Individuals don’t need to register this right with HMRC.
Between 2026 and 2028, the State Pension age is changing to 67. Originally it was proposed the minimum pension age would be linked to State Pension ages, so it was always 10 years earlier, but this was not included in the Finance Act 2022.
FCA - A new Consumer Duty (PS22/9)
The FCA has been considering since 2018 how to take forward feedback from stakeholders that the level of harm in consumer markets was too high and that a change in regulatory approach was necessary. Its 2019 Feedback Statement concluded that a review of its Principles was necessary, as well as consideration of a private right of action for consumers to obtain recourse. The result of that review was the publication of CP21/13 which proposed a new overarching “Consumer Duty” and looks to measure firms by the customer outcomes achieved. The proposal set a new and higher expectation of the standard of conduct expected from firms dealing with retail customers and will apply across all retail financial services, including those that are several steps removed from the end consumer.
The Consumer Duty is comprised of a package of measures:
- new “Consumer Principle” which serves as a holistic standard of conduct and sits above the existing “treating customers fairly” and other Principles
- a set of “Cross-cutting Rules” that flesh out the new Consumer Principle and clarify the behaviours required
- the “Four Outcomes”, being specific rules and guidance aligned to Communications, Products & services, Customer Service, and Price & Value.
The package of measures raise the bar in terms of the conduct expected from firms, in particular by giving the Principles greater bite and increasing the requirements on firms to evidence good outcomes and proactively take account of real-world customer behaviours before harm occurs. The new rules came into force in July 2023 for new products, with the rules being applied to closed book products from July 2024.
Consultation on a policy framework to support individuals use their pension savings in decumulation
This is a follow up consultation to the DWP’s earlier Call for Evidence titled ‘Helping savers understand their choices’. The DWP want to place a duty on trustees to offer decumulation services which are suitable for their members and consistent with the pension freedoms.
- They want schemes to provide a solution or solutions that deliver what members want to achieve from their later life income.
- They want schemes to guide their members towards products and services based on their response to simple questions.
- They want to understand the practical considerations involved with partnering arrangements to provide these solutions.
- They want to establish whether a centralised scheme is needed to deliver decumulation options where trustees don’t offer them directly.
- They want to know what the government can do to encourage a decumulation Collective Defined Contribution (CDC) market to emerge.
Ending the proliferation of small pots
This is the government response to the call for evidence “addressing the challenge of deferred small pots”. It proposes a multiple consolidator model as a solution utilising either a clearing house or central registry to match pots and communicate with members. There would be a new authorisation regime to be a consolidator. It proposes this rather than the other option being considered, such as pension follows member.
It also signals a further consultation on “stapling” where the members active pension pot is assigned as their pot for life unless they actively choose an alternative provider as a potential next step to reduce the “flow” of small pots.
Pension trustee skills, capability and culture
DWP and HMT have issued a call for evidence to deepen the evidence base around trustee capability and other barriers to trustees doing their job in a way which is effective and results in the best outcomes for savers.
It is focused on three areas:
- Trustee skills and capability.
- The role of advice.
- Other barriers to trustee effectiveness.
They are particularly interested in:
- Whether trustees have the right knowledge and skills to consider investment in the full breadth of investment opportunities.
- Trustee capability for Defined Contribution (DC), Defined Benefit (DB), and Collective Defined Contribution (CDC) schemes, as well as hybrid schemes.
Pensions (Extension of Automatic Enrolment) Act 2023
Pensions (Extension of Automatic Enrolment) (no 2) Bill has completed its journey through Parliament and has been granted Royal Assent.
The Pensions (Extension of Automatic Enrolment) Act 2023 creates powers to reduce the age for being automatically enrolled (to age 18) and enable pension saving from the first pound earned.
So, what’s next? The Department for Work and Pensions (DWP) will launch a consultation on implementing the new measures. Watch this space.
Sustainability Disclosure requirements
This is the long-awaited policy statement to the FCA’s sustainability disclosure requirements. This started with a discussion paper over two years ago, a consultation paper, ferocious industry feedback and two subsequent delays to this paper. This is the FCA’s attempt to curb the ongoing threat of greenwashing and introduce universal formality to how sustainable investment strategies are named and marketed.
The main headlines from the policy statement include:
- Four voluntary investment labels to use with sustainable investment strategies: Sustainability Focus/Sustainability Improvers/Sustainability Impact and Sustainability Mixed Goals.
- New naming and marketing rules which apply to both labelled and non-labelled investment solutions.
- A new disclosure regime for labelled solutions. Non-labelled solutions are also in-scope for the disclosure requirements if a solution is named or marketed on sustainability-related credentials. Non-labelled solutions cannot use ‘sustainable’, ‘sustainability’ or ‘impact’ in the fund name.
- A new anti-greenwashing rule applying to all regulated firms. This applies a sustainability lens to the existing FCA requirement that all communications should be clear, fair and not misleading.
- Proposals for portfolio management products and services (i.e. DFM and MPS) are to be tackled in a separate consultation paper expected in early 2024. This should detail how the labels and accompanying disclosure requirements can and should be applied to portfolios.
- There are no specific sustainability-based rules for advisers. The FCA has instead announced that it
will be establishing an independent working group to help support advisers on sustainability-related
The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.
All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.