Pensions Weekly Update – 19 November 2024

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Here is our weekly summary of key legal and regulatory developments relevant to occupational pension schemes that you might have missed, with links for further information.

As expected, pension reform headlined the chancellor’s first Mansion House speech, with “megafunds”, “consolidation” and “growth” being the buzz words of the evening. Pension reform will be implemented through the pension schemes bill, which is planned for the first half of 2025. The speech was followed by the release of various documents, including:

An interim report covering the first phase of the government’s pension review. The report covers scale and consolidation in the defined contribution (DC) market, measures in relation to the Local Government Pension Scheme (LGPS) and changing the focus on cost versus value in the DC market. The report says that “the government is clear that the future of the workplace DC market lies in fewer, bigger, better run schemes, with the scale and capability to invest in a wide range of asset classes, such as private equity and infrastructure, that can deliver better returns for savers long-term and boost investment in the UK, which benefits savers and their communities.” The report notes that at this stage, the review has decided not to make specific recommendations in relation to UK investment, beyond those outlined in relation to the LGPS, but the review “will therefore use its next stage to consider whether further interventions may be needed by the government to ensure that these reforms, and the significant predicted growth in DC and LGPS fund assets over the coming years, are benefiting UK growth”.
The interim report was published alongside two consultation documents (more below), and an analysis of trends in UK pension fund investment to support the proposals set out in the report.
A consultation on proposed measures relating to DC schemes. This consults on a minimum size requirement for default arrangements, as well as limits on the number of default arrangements. “Although there is no conclusive evidence of optimal size of [assets under management] at default fund level in DC pension schemes, a number of papers suggest a greater number of benefits can start to arise at £25 billion - £50 billion (or greater) including on in-house investments, access to wider asset classes, and other scale benefits”. So far as timescales go, the year 2030 is proposed for any changes. The document states that setting a required minimum size of assets under management at default fund level for pension providers would consolidate the multi-employer market into a much smaller group, compared to the roughly 30 authorised master trusts and 30 contract-based workplace providers that currently exist. There are also proposals to enable contractual overrides for contract-based pension arrangements, subject to appropriate member protections and legislative changes. This would enable transfers without consent into either a trust-based or contract-based arrangement, and would aid the shift to fewer, larger schemes. In relation to cost versus value, one of the questions asked in the consultation is whether it would be appropriate to remove the ability of providers to set differential pricing for the same pension product. The government is also considering the possibility of imposing a legal duty on employers to review their workplace pension schemes at regular intervals with value for money in mind. Consultation closes on 16 January 2025.
A consultation on proposed measures relating to the LGPS. This covers the government’s intention for pooling of assets by the 86 separate LGPS administering authorities, with administering authorities being required to fully delegate the implementation of investment strategy to a pool, and to take their principal advice on their investment strategy from the pool. Pools would be required to be investment management companies, authorised and regulated by the FCA, with the expertise and capacity to implement investment strategies. Administering authorities would be required to transfer legacy assets to the management of the pool. In addition, an overhaul of LGPS governance is planned and each of the 86 administering authorities will be reviewed to ensure it is fit for purpose. Consultation closes on 16 January 2025.
A call for evidence to inform development of a new Financial Services Growth & Competitiveness Strategy, closing on 12 December 2024, has been published.
A consultation has been published on implementing a UK Green Taxonomy to support investment into activities aligned with sustainability goals, and to mitigate greenwashing. Consultation closes on 6 February 2025.
A consultation response and draft legislation to bring ESG ratings providers into regulation has also been published.

The Pensions Regulator (TPR) has published its new compliance and enforcement policy for collective defined contribution (CDC) schemes. The policy explains how TPR will supervise CDC schemes in line with legislation. Currently, the only authorised CDC scheme is the Royal Mail Collective Pension Plan, but TPR says that its policy is aimed at the market as a whole and will be kept under review as CDC provision evolves.
In this blog post, Clare McNicholas takes a look at whether there is any general obligation to consult on small-scale redundancy exercises.