NEWS   |    May 9, 2024

What does the Spring Budget mean for pensions?

The Spring Budget built on the Mansion House speech in many ways. There was not a lot of detail but there were a few pension-related updates and announcements which caught our eye.

Value for money framework

The Chancellor announced powers that would be given to both the Financial Conduct Authority (“FCA”) and the Pensions Regulator (“TPR”) in legislation slated for as early as 2027, enabling them to enforce the “value for money” regime.

The new requirements are intended to expose schemes who have been choosing short-term investment returns at the expense of long-term ones. It is proposed that the FCA and TPR will have power to close to new employers schemes which are consistently under-performing on value for money metrics and even, if necessary, to wind them up.

Following the joint consultation of the Department for Work and Pensions, TPR and the FCA in 2023, an FCA consultation is expected this spring which will lay out plans to have contract-based schemes disclose historical net investment returns for their default funds.

UK pensions investing in the UK economy

The Chancellor announced an intention to build on the Mansion House reforms by confirming defined contribution (“DC”) schemes (and, in time, local government schemes) will be required to publish their asset allocation breakdowns to reveal which of them are invested in UK equities. Although initially just an intention to require disclosure of UK investments, the Government aims to use this information to assess the need for “further action”. This presumably indicates possible regulatory intervention in the future if results do not reveal the desired concentration towards UK equities.

Other announcements and future plans

The Chancellor also announced two policy intentions for pensions in the future, with specifics to follow. The Government will:

• explore the “lifetime provider” (i.e. one pot for life) model for DC schemes in the long-term; and

• legislate on ESG in the future.

Other pensions related announcements in the Spring Budget included a commitment to the “triple lock” through state pensions being increased for 2024 by 8.5%.

Next steps

Look out for the new legislation expected later in the year which will hopefully provide more clarity and certainty on pensions for employees and employers alike.

Beth and Danyal’s article was originally published in Employee Benefits, here.

The views in this article are intended for general information purposes only and should not be used as a substitute for professional advice. Arc Pensions Law and the author(s) are not responsible for any direct or indirect result arising from any reliance placed on content, including any loss, and exclude liability to the full extent. Always seek appropriate legal advice from a suitably qualified lawyer before taking, or avoiding taking, any action. If you have any questions on the points raised in the above, please do not hesitate to get in touch.

Related News