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Pensions Bulletin 2023/27

Pensions & benefits Pensions dashboards Policy & regulation

Chancellor set to unveil pension reforms at Mansion House speech

Speculation is growing as to the nature of the investment and pension reforms that Chancellor Jeremy Hunt may unveil at his Mansion House speech, expected to be on Monday 10 July 2023. And with the DWP needing to issue its own set of announcements before Parliament goes into recess on 20 July 2023, next week could be significant in the development of public policy for pension schemes of all hues.

The themes we reported on last week (see Pensions Bulletin 2023/26) appear to remain in play – encouraging pension schemes to invest in higher-growth British assets, and to support further consolidation of schemes – with some papers reporting that the Government is closely examining calls from the Tony Blair Institute to consolidate the pensions sector through the creation of new superfunds and through the Pension Protection Fund.

But most are suggesting that the Chancellor’s focus is likely to be on spurring economic growth through pension funds channelling more money into those UK companies with the potential to grow but needing to raise capital in order to do so, with any consolidation initiatives being a means to that end.


It now seems likely that the Chancellor’s speech next week will include some significant announcements on pensions-related matters, which in turn could impact some of the issues on which the DWP needs to reach a landing.

If so, we would expect the Treasury to set out policy detail, possibly for consultation, fairly soon after the Chancellor has spoken and for a landing to be reached by the time the Autumn Statement is delivered. Any DWP initiatives will need to dovetail in with this wider picture.

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Pensions Regulator uses latest DC survey results to foreshadow forthcoming VFM framework

The Pensions Regulator has used the results of its latest DC schemes survey to highlight the value for member requirements that schemes are meant to comply with, and to urge DC trustees to evaluate whether they can compete on value for money with the best master trusts, ahead of the upcoming VFM framework (see Pensions Bulletin 2023/04).

The Regulator notes that only 24% of DC schemes are meeting the key governance requirement to assess good value but since larger schemes are likely to offer good value, 89% of DC members were actually in a scheme that met the requirement.

Nicola Parish of the Pensions Regulator went on to say that “Trustees of small schemes should ask whether the best decision they can make for their members is to put them into a better-run, better-value scheme and wind up. The upcoming joint value for money framework will increase transparency and competition in the market, so now is the appropriate time for trustees to evaluate whether they can compete with the best master trusts in offering value for money”.

The survey also covers other topics such as awareness of pensions dashboards, climate change, codes of practice and guidance, master trust supervision and diversity and inclusion of trustees.


The Regulator continues to focus on VFM for DC schemes and uses every opportunity to raise awareness about it. The upcoming VFM framework – which we expect to see the next developments about in the very near future – will only increase pressure on trustees of under-performing schemes to take decisive action to improve member outcomes.

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FCA widens access to long term asset funds

On 29 June 2023 the Financial Conduct Authority published its new rules to extend access to Long Term Asset Funds (LTAFs) to a wider range of DC pension scheme members as well as retail investors. Currently, only auto-enrolment (AE) qualifying DC schemes can use LTAFs and then only as part of their default fund. The new rules followed the consultation the FCA launched in August 2022 on broadening access to such funds (see Pensions Bulletin 2022/30).

LTAFs are FCA-regulated and have been designed to help investment, on a pooled basis, in assets such as venture capital, private equity, private debt, real estate and infrastructure. The FCA finalised the rules for such funds in October 2021 (see Pensions Bulletin 2021/45).

For trustees and managers of occupational DC schemes the key points from the extension to the rules are that:

  • LTAFs can now be offered to scheme members of an AE qualifying scheme as a self-select option outside of designated default arrangements and also to members of non-AE schemes. For example, this might include alternative lifestyle strategies
  • The exposure limit for self-select investors in AE schemes is the higher of 10% of the member’s pension value within that scheme, and the exposure deemed appropriate within the default arrangement of the same qualifying scheme when investing in the same LTAF. For members of non-AE schemes the exposure limit is 10% of the member’s pension value within that scheme. Schemes will need a mechanism for adhering to this
  • An expectation has been set that self-select members (but oddly not default investors) should "receive a notification alerting them to the illiquid nature of their holdings as they approach retirement age". However, although the FCA is clear that this is their expectation, they have explicitly stated that they are not making a rule to this effect but that they “expect firms to exercise appropriate judgment when designing communications appropriate to their target audience”

The FCA has also asked whether they should consult on removing some or all of the protection of the Financial Services Compensation Scheme (FSCS) from activities relating to LTAFs. FCA’s current view on this can be summarised as “There are good arguments in favour of removing FSCS coverage for activities relating to LTAF. Providing FSCS protection in circumstances where investors seek higher investment risk might be said to create a moral hazard by providing additional protections for an inherently risky product. It might seem incompatible to provide investors with a safety net in such circumstances”. Responses are sought by 10 August 2023.

On the retail side, the FCA is also changing the distribution categorisation of the LTAF to become a Restricted Mass Market Investment (RMMI). This means that LTAFs can be promoted to mass market retail investors, but specified risk warnings must be provided and an appropriateness assessment carried out, amongst other safeguards.

These new FCA rules came into force on 3 July 2023. There is a transitional period of one year from this point for LTAFs which are already authorised to make any required changes.


We agreed with the FCA’s proposals, overall, and believe that, given the asset classes LTAFs are exposed to, broadening access to LTAFs is likely to lead to better long-term outcomes for members of DC pension schemes. However, for this to happen the FCA needs to authorise a number of LTAFs – with the first being authorised only this March.

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FRC issues model guidance for actuaries

With less than two days before version 2.0 of Technical Actuarial Standard 100 came into force on 1 July 2023, the Financial Reporting Council published new guidance on that part of TAS 100 relating to models used in technical actuarial work.

Running to nearly 30 sides, the guidance seeks to help actuaries comply with the modelling aspects of TAS 100, which mainly comprise a Principle and five supporting Provisions. The guidance does this by first explaining which models are likely to be within scope – this includes where the output of a model is used in the actuary’s own model. It then goes on to consider the five Provisions. There is a lot of detail here, which arguably limits how the actuary goes about complying.

There is then a short section on applying the proportionality guidance. This contains a good practice recommendation for model categorisation which the FRC suggests should be applied on an entity-wide basis. This in turn links to the first of three appendices – a risk-based sliding scale of model governance. The second appendix sets out some case studies (“scenarios”) which usefully explain an actuary’s role and responsibilities in relation to model compliance over a range of different situations.

Unlike the two guidance documents that were published with TAS 100 on 3 March 2023 (see Pensions Bulletin 2023/09), this latest guidance has been published without any public consultation. As with the other guidance its status is “persuasive, not prescriptive”, albeit the FRC encourages compliance.


The guidance has something to say whatever role an actuary undertakes in relation to a model – be it a developer, validator or user – and contains material that is not obvious from a reading of TAS 100 itself. As such, actuaries will want to read and carefully digest its contents.

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HMRC sets out further details on stand-alone lump sum processing

HMRC’s June 2023 pension schemes newsletter, published on 30 June 2023, confirms that its annual allowance calculator is now updated for the 2023/24 tax year (ie for the Budget changes being implemented by the Finance Bill), sets out further details regarding the payment of stand-alone lump sums, and provides more timing information on the continuing roll out of the Managing Pension Schemes service.

On the payment of stand-alone lump sums, the newsletter recites the Government amendment to the Finance Bill (see Pensions Bulletin 2023/24), making clear from when such lump sums are subject to the new - potentially partially taxed - treatment, what tax code to apply to any taxable element (including potentially the emergency code) and how the taxation of such lump sums should be reported to HMRC ahead of changes being made to the Real Time Information (RTI) programme. HMRC asks that this new reporting be put in place as soon as possible and by no later than 30 September 2023.

The Managing Pension Schemes service article contains the usual requests to migrate away from the old Pension Schemes Online service, promises to release event report functionality for 2023/24 this summer, sets out the 14 August 2023 filing deadline for Accounting for Tax returns for the quarter ending 30 June 2023, and concludes with an early warning that pension scheme returns for 2023/24 will need to use the Managing Pension Schemes service and that schemes should migrate to the new service by April 2024 at the latest.


The PAYE process for any taxable element of stand-alone lump sums is as expected and is similar to the process set out by HMRC in March 2023 in its Lifetime allowance guidance newsletter for the newly income-taxable elements of serious ill-health lump sums and lifetime allowance excess lump sums following the Budget changes.

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Royal Assent for the Financial Services and Markets Bill

The Financial Services and Markets Bill, that replaces retained EU law on financial services with a new UK model of regulation, as part of the “Edinburgh reforms” flagged by the Chancellor last December (see Pensions Bulletin 2022/46), has completed its passage through Parliament and obtained Royal Assent on 29 June 2023.

The Government marked the occasion with a gushing press release.

One point of note for pension schemes is that Section 21 of the Financial Services and Markets Act 2023 sets out enabling legislation to allow the Government to progress its sustainability disclosure requirements (SDR), which to date have seen little development beyond the publication of a roadmap in October 2021 (see Pensions Bulletin 2021/43).

The Act provides for the Treasury to prepare, publish and keep under review an SDR policy statement and for the FCA and PRA to have regard to such a statement when making rules or issuing guidance in connection with disclosure concerning matters relating to sustainability.

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PPF updates its retirement option factors

The Pension Protection Fund has announced that the factors to be used when members exercise certain retirement options have been revised, with the new factors applying to anyone retiring on or after 1 October 2023.

Due to recent changes in financial markets, and in particular the rise in yields, the tax-free lump sum received in exchange for pension reduces, an early retirement pension is less (with factors now distinguishing between pre and post April 1997 service) and a late retirement pension is more.

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