Single-employer schemes would be excluded from these proposals, as a proposed new Value for Money framework is being designed to ensure these schemes achieve value or move to consolidate. The Government is also:

• seeking views on whether other schemes with specific characteristics, such as sharia-compliant funds, should be excluded in the public interest;
• seeking views on the role of employers and advisers, with proposals to encourage a shift in focus from ‘cost’ to ‘value’, following concerns that excessive focus on the former has resulted in less attention on other scheme quality metrics and limited the ability for pension schemes to invest in a broader set of asset classes; and
• consulting on proposals to set the Local Government Pension Scheme on a clearer, firmer, long-term path to scale and consolidation, along with measures to improve funding, pool governance and drive local investment.

Action: We are responding to the consultation and have taken soundings from clients, in particular on the role of employers and proposed executive sponsorship of pension matters. 
 

Autumn Budget 2024

The Government’s Autumn Budget aims to "fix the foundations of the economy and deliver change by protecting working people, fixing the NHS, and rebuilding Britain." Key policies focus on "strengthening the fiscal framework", "supporting people with the cost of living" and "raising revenue to fund public services".

Key points included:

• The announcement that unused pension savings will be included in estates for the purposes of Inheritance Tax from April 2027. The Government has launched a consultation on the implementation, with further consultation on draft regulations expected in 2025.
• Employer NI will increase from 13.8% to 15% in April 2025 and the earnings threshold for employer NI will drop from £9,100 pa to £5,000 pa. These measures will add to employment costs alongside a minimum wage hike. However, higher employer NI will increase saving from pension salary sacrifice.
• The state pension triple lock will be maintained, with state pension increasing by 4.1% from April 2025. This will raise the weekly amount of the new state pension from £221.20 in 2024/25 to £230.25 in 2025/26.

Our experts dive deeper into these announcements and the impact on employers in this blog post.
 

TPR emphasises that effective ESG integration can lead to better long-term outcomes for pension savers. Trustees are encouraged to use this resource to enhance their understanding and application of ESG principles, moving beyond mere compliance towards more impactful and sustainable investment practices.

This development underscores the growing importance of ESG in pension scheme governance and aligns with broader regulatory trends promoting responsible investment.

Action: Trustees should review the new resource and use this to help inform and benchmark their approach. 

Productive finance – navigating trends and challenges

Recent publications from the Pensions Policy Institute (PPI) and the Society of Pension Professionals (SPP) provide complementary insights into the evolving landscape of UK pension investments, highlighting both current trends and potential solutions for optimising long-term returns.

The PPI report reveals significant shifts in pension scheme asset allocation, including:

• a shift towards more diversified portfolios, reflecting broader macroeconomic trends and regulatory influences; and
• DC schemes, in particular, are increasing allocations to private markets, infrastructure, and sustainable investments to enhance returns and meet members’ evolving expectations.

These trends reflect schemes' efforts to enhance returns and manage risks in a complex economic environment. However, the SPP paper, "Solving the UK investment puzzle", identifies persistent challenges in the UK investment landscape that may hinder these efforts, such as:

• barriers to efficient capital allocation in UK markets;
• regulatory constraints limiting investment in productive assets; and
• sub-optimal collaboration between pension schemes and asset managers.

These insights offer trustees and investment advisers valuable perspectives for navigating the UK investment landscape. By understanding broader market trends and potential regulatory reforms, schemes can work towards optimising their investment strategies to enhance long-term returns and better serve their members.

Elsewhere, the Pensions Administration Standards Association (PASA) has published a Dashboards Toolkit to support connection of additional voluntary contributions (AVCs) to the pensions dashboard ecosystem. This includes a checklist of activities that trustees with AVCs should consider when arranging to connect, either when all scheme benefits (including AVCs) are being connected by a single party, or if the AVC provider can connect on behalf of trustees. A list of connection approaches offered by the major AVC providers is being maintained.

Action: Trustees should check their connection date as outlined in the amended connection timetable and should be working with their administrators and providers to establish how connection (including AVCs) will be completed and what further work is required to facilitate this.