This insight covers the pension measures from Labour’s first Budget in almost 15 years, the PPF’s full response to its consultation on changes to section 143 valuation discount rates for small schemes, the Pension (Special Rules for End of Life) Bill and a new Data (Use and Access) Bill.
30 October 2024 Autumn Budget – bringing most unused death benefits into IHT
The first female Chancellor’s Autumn Budget contained just one headline measure on pensions – that, as from 6 April 2027 the “loophole created by the previous government” will be closed and both defined benefit and defined contribution “inherited pensions” will be brought “into inheritance tax” (IHT) by treating most unused pension funds and death benefits in UK registered pension schemes as part of a ‘deceased’ estate for IHT purposes. This will include most authorised DC death benefits and lump sum death benefits in DB schemes – the only listed death benefits in the Government’s IHT consultation on this change referred to as being excluded are a DB/ DC dependant’s scheme pension and a DC charity lump sum death benefit. Our in-depth insight has more detail on these measures.
PPF publishes full response to consultation on section 143 bespoke discount rate for small schemes
On 29 October 2024, the Pension Protection Fund (the PPF) published the full response to its March 2024 consultation on allowing marginally overfunded schemes with less than £50m in section 143 liabilities to choose whether to adopt a bespoke discount rate for section 143 valuations (used to see if a PPF-eligible scheme has sufficient assets to secure benefits outside the PPF following an employer insolvency). Doing so provides the small amount of schemes expected to be impacted with flexibility and allows a more accurate reflection of buyout pricing. The adjustments do not affect section 179 valuations (used to estimate scheme funding on employer insolvency – results used for the PPF levy).
The PPF’s initial consultation response confirmed that nine responses had been received and most were in support of the changes. Publication of the full response was delayed because of the general election. The changes were implemented for section 143 and section 152 valuations (used for reconsideration applications) as from 31 May 2024. The updated valuation guidance can be accessed here.
Pension (Special Rules for End of Life) Bill introduced
On 21 October 2024, the Pension (Special Rules for End of Life) Bill received its first reading in the House of Commons. Although, as at the time of writing, the Bill’s text had not been released, the Bill is expected to include the same changes as the Private Members’ Bill with the same title as that which was introduced into Parliament in 2023/24. That Bill amended the definition of ‘terminal illness’ for the PPF and the Financial Assistance Scheme to extend the life expectancy eligibility element from 6 months to 12 months so that members can take a lump sum at an earlier date. The background briefing notes to the King’s Speech on 17 July 2024 explained that this measure was going to be introduced by the Government in the next parliamentary session. The Bill is timetabled to receive its second reading in the House of Commons on 17 January 2025.
Data (Use and Access) Bill introduced into the House of Lords
On 23 October 2024, the Data (Use and Access) Bill (developed from the Data Protection and Digital Information Bill) was introduced into the House of Lords. Its second reading should take place on 19 November 2024. The explanatory notes to the Bill explain that it is “intended to harness the power of data for economic growth, support a modern digital government, and improve people’s lives.” Amongst other things it:
- includes provisions on Smart Data schemes which permit secure sharing of customer data, improving public service delivery through extended data sharing, and retaining biometric data;
- will set the legislative framework for digital verification services for verification providers included on a government register;
- includes provisions regarding personal data flow and use for law enforcement and national security purposes;
- will reform the Information Commissioner in several ways including setting it up as a new statutory body corporate, the Information Commission, with “new, stronger powers and a more modern structure – while maintaining its independence”; and
- changes the UK General Data Protection Regulation (the UK GDPR), the Data Protection Act 2018 and the Privacy and Electronic Communications Regulations 2003 (the PECR) including:
- creating a new lawful ground under the UK GDPR of data processing for ‘recognised legitimate interests’ – this covers matters such as processing in the public interest or exercise of official authority or processing necessary for safeguarding national security, protecting public security or for defence purposes;
- widening the ‘lawful base’ for the sole use of automated decision-making to make ‘significant decisions’ about individuals and setting relevant safeguards (but not including special categories of data);
- introducing a data protection test for making regulations for approval of transfers to a country or international organisation; and
- updating the PECR with new provisions on things such as personal data breach reporting by communications service providers and unsolicited direct marketing communications. The Bill also updates the ICO’s enforcement powers under the PECR. The PECR contains “special rules for certain types of processing, such as personal data collected through cookies and direct marketing, which overlay the general rules for processing in the UK GDPR”.
The Information Commissioner’s response to the Bill notes that its changes are “pragmatic and proportionate…they align well with the ICO’s enduring objectives…[but] there are some points that would benefit from additional clarity…which I have already shared with the Government... [and] are summarised in” Annex One to the response.
Separately, the ICO has asked organisations to ‘recognise’ the effect of data breaches on individuals and to improve data protection for those who are vulnerable. The announcement comes off the back of figures which show that 55% of UK adults report having had data lost or stolen but 25% say they did not get any support from the organisations responsible. “You have a role to stop the negative ripple effect in someone’s life from spreading further. It is vitally important to acknowledge what has happened, be human in your response and commit to making sure it doesn’t happen again.”
Action: Schemes are subject to data protection legislation and must ensure that they keep up to date with changes in this area.