Pensions updates | March 2024

Key pensions issues this month include the abolition of the lifetime allowance (LTA) and the replacement of the Pensions Regulator (TPR)'s ten codes of practice into a new single code due to come into effect on 27 March 2024.

Abolition of the LTA

Under the second stage of the reforms, the following key changes are being made in the Finance Act 2024:

• The lifetime allowance regime is being removed from pensions tax legislation.
• Three new pensions tax allowances are being introduced in income tax and pensions tax legislation, as follows:
  • a lump sum allowance applies to authorised lump sums (in practice, primarily the pension commencement lump sum) and imposes a monetary cap of £268,275 (25% of the current standard lifetime allowance) on the maximum tax-free lump sum that may be drawn by a member of a registered pension scheme;
  • a lump sum and death benefit allowance limits the tax-free element of certain authorised lump sums and authorised lump-sum death benefits to £1,073,100, where the lifetime allowance would previously have applied; and
  • an overseas transfer allowance applies to certain transfers from registered pension schemes to non-UK schemes, limiting the tax-free element to the same level as the lump sum and death benefit allowance.
• The new allowances are applied differently for those who have one or more of the available forms of transitional protection from the lifetime allowance charge.
• Where the new lump sum and death benefit allowance is exceeded, a recipient of a relevant authorised lump sums or lump-sum death benefits is subject to marginal-rate income tax.

New TPR General Code of Practice

TPR's new general code of practice is due to come into force on 27 March 2024.  It contains new governance requirements and details of how the Regulator expects pension schemes to be managed. 

Schemes should be taking action now, if they have not already done so, to check that they are able to comply with the new code. Most pension schemes with over 100 members will be required to conduct an Own Risk Assessment, to be made available at TPR's request, within 12 months of the end of the scheme year following the new code coming into force. 

Please get in touch for further support on the steps that should be taken in order to ensure compliance with the new Code of Practice.