Autumn Statement 2023 - A summary of the key pension announcements

Anish Rav summarises the key pension announcements made in the Autumn Statement 2023:

Lifetime provider (pot for life)

The idea of a ‘lifetime provider’ for savers was announced. This would be a major change to workplace pensions, allowing individuals to have contributions paid into their existing scheme when they change jobs. Whist the concept is simple, there are many factors that need to be considered to make it work in practice. This is especially true for the UK as it has always had an ‘employer decides’ pension system. Some of the key considerations include how the administration framework would operate, and ensuring there is a choice architecture in place for savers so that they can select an arrangement that is best for their circumstances.?

It’s good to see that at the same time as the call for evidence, the proposals to introduce the multiple default consolidator model will continue, so that small pots under ￡1,000 can be consolidated.

Decumulation options

The announcement that there will be an update on the duties for Trustees of occupational schemes to offer decumulation services and products at an appropriate quality and time will mean that savers should be able to access the full range of options through whichever scheme they are in, whilst longer term plans such as the use of CDC schemes are further explored.

DB Schemes

The tax on surplus returns for DB Schemes will reduce from 35% to 25% from April 2024.

There will be a consultation on the appropriate regime in which surpluses can be paid, the enablement of 100% PPF coverage for schemes that opt to pay a higher levy and the PPF’s role to act as consolidator for schemes that are unattractive to commercial providers. These changes mean some schemes might need to review their end game journey planning.

Investments

The Government has confirmed its intention to establish a Growth Fund within the British Business Bank (BBB), giving pension schemes access to BBB’s pipeline of opportunities. In addition, the Government will commit ￡250m to two successful bidders under the Long-term Investment for Technology and Science (LIFTS) initiatives. These initiatives will provide additional options for schemes and follow on from the Mansion House reforms announced in the summer.

Lifetime Allowance abolition

The Autumn Finance Bill 2023 will include the legislation required to remove the Lifetime Allowance. This will clarify the taxation of lump sums and lump sum death benefits, and the application of protections, as well as the tax treatment for overseas pensions, transitional arrangements, and reporting requirements.? This will take effect from April 2024, so the industry will need to be ready to implement the system changes needed within a short timeframe once the legislation has been enacted.

Trustee skills and capability

The DWP will support TPR in setting up a Trustee register, to aid engagement with Trustees – any initiative that helps Trustees is to be welcomed.