Annual DB pensions conference

The day opened with a look at the DB landscape and what lies ahead for schemes, featuring insights from Zoë Burdo, Aaron Punwani and Steve Webb. George Bassnett and Ken Willis followed with a perspective on managing global risks alongside local covenant considerations. Jonathan Camfield and Keri Maharaj explored how to align operational delivery with endgame strategy, and Lyall Smith highlighted the essential role of administration to enhance member experience through times of change.

For the second session, Gavin Smith set the scene with a challenge to think like an insurer when planning stronger endgame strategies. Michelle Wright and Fiona Brown shared a case study about the full buy-in of the Rolls-Royce Pension Fund, focussing on how to deliver a member-first transaction. The session closed with an interactive “choose your own adventure” discussion on DB endgame strategies, led by Mary Spencer, Jon Forsyth, Laura Amin, Victoria Snowden and David Fink.

Richard Soldan, Head of LCP’s DB funding group, was joined by Sean Burnard of Law Debenture and LCP Partners David Fairs, Helen Abbott (covenant) and John Clements (investment).

The session included reflections on the new regime from David, the author of the original draft of the new funding code in his time at the Pensions Regulator. David highlighted that both the financial markets and the regulatory landscape had moved on significantly since then – but the principles of the code continued to make sense in the current world.

This was followed by a panel session where the panel shared their views and experience of the new regime. Key themes were:

1. The opportunity to set the right strategy in the current world
   With all the recent developments, the requirement in the new funding regime to set a long term strategy is a great prompt for trustees and employers to ensure they are aware of the new possibilities and to set a strategy that satisfies their objectives.
2. A practical and pragmatic approach
   As many schemes are now well-funded, it’s really important to adopt an approach that achieves compliance in the new regime in a practical way.  Helen in particular emphasised her focus on providing pragmatic covenant advice to trustees that is sufficient to reach positive conclusions without over-engineering.
3. Greater integration and collaboration
   The new regime encourages more focus on managing a scheme’s funding, investment and covenant risks in an integrated way – and that needs more collaboration between trustees, the employer, and advisers.

Steve Webb moderated this Q&A style panel discussion with Nathalie Sims, LCP, David Walmsley, The Pensions Regulator (TPR) and Helen Forrest Hall, The Pensions Management Institute (PMI).

The panel discussed: the recent changes in the Professional Trustee landscape, Sole Trusteeship, Diversity, Equity and Inclusion, capacity in the system, how CFOs work best with Professional Trustees, as well as governance including managing potential conflicts of interest.

Structural shifts in Trusteeship

The panel discussed recent changes to the Trustee landscape, based on the most recent Sole Mates report, key themes being the maturity of the Professional Trustee market, an increase in concentration of appointments amongst trustee directors, the rise of Sole Trusteeship amongst larger schemes and an increased focus on governance.

The rise of Sole Trusteeship

There has been a notable move towards Sole Trusteeship over the last few years. The audience commented how the word ‘Sole’ is misleading when often a team are involved in the governance of a scheme. As our Sole Mates report shows the market is changing rapidly and new governance models are emerging.

Earlier today, the APPT announced an updated code for Sole Trusteeship, the first in six years, which directly impacts this space, particularly the PMI accreditation process amongst other areas.

Governance

Questions primarily revolved around the importance of good governance, independence, and maintaining the member voice. DEI was mentioned as a potential downside when large trustee boards are replaced with a smaller group of trustees under a Sole Trustee arrangement. Nathalie mentioned the benefit of consultative committees and carefully thought-out transitions. David outlined a case study of TPR enforcing it’s ‘special powers’ to protect schemes when the move to Sole Trustee may not have been for the right reasons. He urged the industry to inform TPR when lay trustees are removed from boards with little or no warning.

The audience praised the value that some lay trustees can bring to boards. Helen outlined there is a push to accredit lay trustees and encourage early-career professionals into trusteeship to harness a diverse range of skills whilst ensuring the bar is not set too high.

Conflicts of interest

The conversation then turned to the blurred lines between trustee and advisor and the conflicts of interest this could raise when 13 of the 18 Professional Trustee (PT) firms now offer services beyond core trusteeship, (primarily secretariat). David advised how TPR will be reviewing this carefully.  Helen added how conflicts can arise within employer and member nominated trustees and the issue does not always sit with the Professional Trustee.

The panel spoke about best practices in strengthening collaboration and building trust between executive teams and sponsors with the importance of establishing clear roles, regular strategy sessions and forward-looking planning being critical to effective working relationships on a trustee board.

AI

The panel touched on the use of AI to help make better decisions whilst also acknowledging risks and how this can help increase member engagement. Ultimately trustees remain responsible for oversight and ethical applications of AI.

With a DWP consultation expected in the next few weeks this Q&A session only touched on some of the aspects of how the Trustee landscape is changing.

Alasdair Mayes, Justine Joy, Lydia Fearn and Jonathan Balkwill answered questions on both known and potential changes to the pensions tax regime, covering both the application of inheritance tax (IHT) to unused pension pots and death benefits from April 2027 and rumoured measures in the forthcoming Budget.

In relation to inheritance tax, the three areas of focus were:

Scope

• The new regime comes into force for deaths on or after 6 April 2027 – That will come round quickly
• Clarification of which benefits are in scope and confirmation of how the process will work is expected alongside the Budget on 26 November – This should provide trustees and employers the clarity to start work in earnest on the changes
• The impact will vary significantly between different pension arrangements and employers should not assume they can leave everything to providers – Key first steps are:
  • To establish which benefits from each arrangement are going to be in scope
  • Which groups of employees and members are likely to be affected
  • Whether changes in benefit design can be made to reduce the impact

Processes

• The new regime is extremely complex – Under current proposals 18 steps are required between notification of death and payment
• It is likely to delay payment of benefits, increase risk of disputes and trigger tax penalties on beneficiaries
• Very few individuals complete expression of wish forms and keep them up to date
• Streamlining existing processes will help:
  • Establishing how processes work currently and typical existing timescales
  • Finding out about deaths faster
  • Gathering the information needed efficiently to enable exercise of discretion first time
  • Ensuring the right structures are in place to exercise discretion promptly

Communications

• Given the risks and complexity a communications plan is needed:
  • Newsletters articles need to be planned
  • Targeted communications to encourage individuals to streamline the process for their dependants

Moving on to the Budget, the two areas of discussion were:

Tax-free retirement lump sums

• Rumours ahead of last year’s Budget led to an extra £7bn for pension pots being withdrawn in the run up
• Some tried to unwind payments after the Budget, only to find they couldn’t
• There has been a significant increase in enquiries again this year following scare stories in the press but no firm indications the tax-free retirement lump sum allowance will be reduced
• Past reductions included protections for rights already built up

Salary sacrifice for pension contributions

• There have been reports that the National Insurance (NI) benefits for both employee and employer of salary sacrifice for pension contributions will be restricted
• The survey published by HMRC in the spring referenced a threshold of £2,000 pa of sacrifice above which NI would apply
• Very few in the public sector use salary sacrifice, so the main impact would be on the private sector
• Any change could be brought in quickly (April 2026?) and employees might not get the opportunity to change the amount sacrificed before the changes apply
• Payroll and HR teams need to be ready to move quickly

Paul Meredith and Helen Barthorpe hosted a breakout session that looked at how we can structure and present information to be more inclusive.

Paul introduced the session through a lens of neurodiversity. He then widened the conversation to think about the broader cognitive needs that our audience may have.

Together we identified four areas that help our communications to be more inclusive:

1. Using a consistent layout.
2. Communicating in clear and direct language, summarising key points.
3. Providing information in multiple formats.
4. Choosing an effective, limited colour palette.

Helen expanded the set of needs we might need to consider – to include visual and motor challenges. These needs often increase with age.

Helen walked through a best-practice approach for four areas that act as the foundation to building more accessible communications:

1. Words. We discussed ways to bring down the reading age to make accessing information easier for everyone.
2. Fonts. We explored what makes a font accessible.
3. Colours. We looked at how choosing the wrong colours can affect people with low vision and colour blindness.
4. URLs. We put ourselves in the shoes of our audience and explored better ways to share URLs.

We discussed how brand guidelines need not be a barrier to make communication inclusive with a bit of creative thinking.

Paul and Helen’s key takeaways were:

• Take the time to review your general communications for accessibility. Just like you do for typos or other errors.
• Set and measure your content against a target reading age.
• Review the fonts and colours you use for accessibility best practice.
• Make sure your members can get to the content behind the URLs you share by presenting them in the right way.

Explore our guide to communicating effectively.