Pensions updates | January 2025

Automatic enrolment thresholds have been maintained

DWP have published a review of earnings trigger and qualifying earnings band for 2025/26 (i.e., the financial threshold determining when an eligible jobholder gets automatically enrolled into a workplace pension).

It concluded that the automatic enrolment thresholds will remain at their 2024/25 levels, reflecting the government's desire to ensure it allows individuals to save towards their pensions, whilst ensuring affordability for employers and taxpayers.

As such:

• the existing threshold of £10,000 for the earnings trigger will be maintained for 2025/26
• the value of the lower limit of the qualifying earnings band for 2025/26 will be maintained at the 2024/25 level of £6,240
• the value of the upper limit of the qualifying earnings band for 2025/26 will be maintained at the 2024/25 level of £50,270

The Pensions Dashboard Programme comment on the updated draft reporting standards for pension providers and schemes

The Pensions Dashboards Programme ("PDP") have published a blog on the updated draft reporting standards for pension providers and schemes (published in November 2024).

The blog highlights that, as part of a new 2-phase approach, providers and schemes will initially only be required to keep records from April 2025 and at a later date there will be an additional duty to routinely send data to the Money and Pensions Service (MaPS). Operational monitoring has been removed. Reporting requirements for dashboards will be confirmed later.

There are also minor amendments to (i) the data standards; (ii) the code of connection; and (iii) the Find and View JSON schemas.

Case update - Promises of mirror pension benefits were contractually binding - Mr H (CAS-50353-Y4X5)

The Pensions Ombudsman upheld a complaint brought by a former employee (Mr H) who was promised "mirror benefits" in respect of the special terms granted to certain members (including Mr H) under their previous pension scheme when transferring to a new scheme under a new employer, as part of an internal re-organisation. Mr H's benefit entitlements were outlined in various documents, and he also received an individual memorandum confirming that his benefits under the new scheme would "mirror" those under the previous scheme.

Mr H was told that his pension payment (including the part in excess of the guaranteed minimum pension) after state pension age, would increase by RPI or 5% (whichever was lowest). Mr H then transferred to the new scheme in 1998 on the basis of these assurances from the new employer. However, the promise was never properly documented by way of amends to the new scheme rules to allow such, and subsequently increases to his pension were applied incorrectly.

To make matters worse, the trustee decided to cease all future increases to pensions in payment from May 2017, after being advised by counsel that the new scheme was not being administered according to the rules.

When Mr H brought the complaint, stating he was entitled to pension increases as per the mirror benefits promised, the trustee and new employer argued there was no valid amendment to the scheme rules to allow for such and any increases were discretionary.

The Ombudsman found in Mr H's favour, stating there was a binding contractual agreement between the new employer and Mr H to provide mirror benefits of the special terms granted under the previous pension scheme. In failing to uphold the contractual obligation, the employer breached the imperial duty of good faith and the trustee's failure to award increases amounted to a breach of trust.

The Ombudsman directed the new employer to:

• amend the scheme rules or increase Mr H's benefits to reflect the mirror benefits promised;
• pay £1,000 to Mr H due to distress and inconvenience caused; and
• pay Mr H any arrears of pension and commutation lump sum (with interest).

Summary

It is therefore important to ensure that any promises being made to employees when transferring to new schemes are properly checked before they are made to ensure they are even possible under the rules of the new scheme and that such promises are properly documented and correctly administered to avoid costly repercussions.