HL Pensions Law Digest 07 April 2025

Welcome to our latest update, in which we cover:

• Pensions Regulator (TPR): oversight of professional trustees 
  • TPR has announced a framework for the oversight of professional trustees. 
• Pensions Regulator (TPR): supporting growth  
  • An open letter to government, setting out TPR’s commitments to supporting economic growth. 
• Pension Protection Fund (PPF): Strategy 2025-28  
  • The PPF’s strategy for the next three years, including its key strategic priorities. 
• Pre-1997 increases from PPF and FAS compensation  
  • The latest update from the Pensions Minister on addressing the issue of increases on pre-1997 benefits from the Pension Protection Fund and Financial Assistance Scheme. 
• Neonatal Care Leave Regulations  
  • A right to neonatal care leave is introduced from 6 April 2025. 
• Morgan Lloyd Trustees Ltd v Revenue and Customs Commissioners
  • A decision of the Upper Tribunal which clarifies the time limit for applying for a scheme sanction charge to be discharged. 

Pensions Regulator: Oversight of professional trustees

On 2 April, the Pensions Regulator (TPR) announced that it will introduce a framework for the oversight of professional trustees. TPR also released a Market oversight report, finding that professional or sole trustees are now used by around half of UK pension schemes; and that together professional trustee firms manage over £1 trillion of assets.

TPR’s concerns 

Concerns identified by TPR include: 

• Risk of conflicts of interest where professional trustees are part of groups offering wider services, such as secretariat, administration or advisory services; 
• Accountability and quality assurance where functions are delegated; and 
• Standards and entry criteria for new hires.

Areas of future focus

TPR intends to focus its engagement on:

• Assessing the impact of profit models on decision-making;
• Reasons for appointing a sole trustee;
• Internal controls operated by sole trustees;
• Any risks associated with in-house advisors, including potential conflicts of interest or issues with indemnity insurance; and
• Daily decision-making and avoidance of inappropriate delegation. 

Next steps 

TPR plans to start targeted engagement with some professional trustee firms over this summer, and to expand its oversight to the remaining firms by the end of 2025. 

Where TPR uncovers material risks, and a failure to meet its expectations, it will consider how it might use its existing powers to mitigate those risks. 

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Pensions Regulator: Supporting growth

The Pensions Regulator (TPR) has published a letter to government, setting out its measurable commitments to supporting economic growth and improving the investment climate. 

TPR sets out its commitments in five key areas. 

Increasing the value of pension funds 

TPR will continue to support the consolidation of poorly performing schemes into fewer, larger schemes with better governance, including by: 

• Designing a process for active analysis of investment performance data made available through the Value for Money Framework; and 
• Conducting a review and reporting on sector insights, data, and analysis to assist the government in making policy decisions on using surplus in defined benefit (DB) schemes. 

Enabling productive investment 

TPR will encourage productive investment by pension schemes, including by: 

• Helping government to understand the types of growth opportunities likely to be attractive to UK schemes; and 
• Raising standards of trusteeship, to ensure that all schemes have trustees who are capable of considering a diversified range of assets. 

Reducing unnecessary regulatory burdens and releasing funds for investment

According to TPR, regulation should not seek to eliminate all risk in the pensions system but should ensure that the system is proportionate and delivers good outcomes for savers. As part of reducing unnecessary regulation, it will: 

• Review its regulatory capital reserving requirements for master trusts, which it considers could release hundreds of millions of pounds for investment; 
• Review all its regulatory interventions and legislation, with a focus on value to savers and to the economy; and 
• Propose the removal of unnecessary legislation. 

Driving growth through data and digital enablement 

TPR wishes to harness the IT revolution to drive effective market competition and innovation, including by: 

• Streamlining its data requirements, so that participants are asked for data only once; 
• Working with government to harmonise data legislation; and 
• Enabling innovation by setting up an industry data and digital working group. 

Supporting market innovation 

TPR intends to support innovation in the pensions industry by: 

• Developing an innovation hub to enable communication and collaboration between its regulatory teams and innovators seeking to bring new products to market; and 
• Testing emerging ideas with industry, where there is potential to benefit savers and the economy. 

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Pension Protection Fund: Strategy 2025-28

The Pension Protection Fund (PPF) has published its Strategy for the next three years, including its key strategic priorities. The publication coincides with the PPF’s 20th anniversary. 

The PPF has grouped its goals under four strategic priorities. 

Acting in the interest of those the PPF protects 

Goals include: 

• Working with government to reduce costs for employers and schemes, by amending legislation to permit a zero risk-based levy and the potential abolition of the PPF administration levy; 
• Enabling data on compensation from the PPF and the Financial Assistance Scheme (FAS) to be available on pensions dashboards as soon as possible; 
• Working with the government on a review of non-increasing pensions accrued before 6 April 1997; and 
• Finalising all known applications to the Fraud Compensation Fund. 

Shaping change in the pensions industry 

Goals include: 

• Considering how the PPF’s capabilities and resources could be leveraged more widely in the pensions sector (noting that the government has considered whether the PPF could operate as a consolidator for defined benefit (DB) schemes with solvent employers); 
• Speeding up the process of decision-making in PPF+ cases, where a scheme in assessment is fully funded on a PPF basis and could secure benefits above the level of PPF compensation; 
• Improving the data held on UK DB schemes to enable better understanding of risks; 
• Investigating how best to manage DB schemes which are unlikely to be able to buy out benefits; and 
• Sharing expertise and experience with others in the pensions industry. 

Adapting and evolving 

Recognising that the pensions environment is maturing, the PPF intends to review and benchmark its systems and functions and to leverage technology, to ensure that it operates efficiently and effectively. 

Building on strong foundations 

Considering the PPF’s own culture and sustainability, its goals include: 

• Developing a new people strategy; 
• Delivering on its 2025-28 diversity, equity and inclusion strategy; and 
• Establishing a view on climate change transition requirements. 

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Pre-1997 increases from PPF and FAS

Torsten Bell, Minister for Pensions, has written to the House of Pensions Work and Pensions Committee (WPC), in response to the WPC’s concerns in its recent report about the non-indexation of pre-1997 benefits paid from the Pension Protection Fund and the Financial Assistance Scheme. 

The Minister comments that the issue is “firmly on [his] radar” and that the government will respond fully to the WPC’s report in the coming weeks. 

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Neonatal Care Leave Regulations in force 6 April 2025

Regulations come into force on 6 April to give effect to the new right to neonatal care leave. 

Broadly: 

• Parents of children who require neonatal care for at least a seven day period will be entitled to a week’s neonatal care leave (NCL) for each seven day period in which the child receives neonatal care. The right to NCL is in addition to other rights to leave, such as to maternity leave or adoption leave. 
• The first period of neonatal care must begin within 28 days of the child’s birth. 
• The maximum entitlement to NCL is 12 weeks, and NCL must be taken before the child is 68 weeks old. 
• An employee who takes NCL is entitled to the benefit of all the terms and conditions of employment which would have applied if they were not on leave, with the exception of pay. 
• The right to take NCL is a “day-one right”, meaning that there is no qualifying period of employment before NCL may be taken. However, an employee is only entitled to statutory neonatal care pay (SNCP) if certain conditions are met, including having been employed for a continuous period of 26 weeks. 
• Accrual of pension rights is only required during paid periods of leave. Member contributions should be based on actual pay during the leave period, while accrued rights must be based on the employee’s usual (non-NCL) remuneration. 

Trustees and employers of schemes open to future accrual should check whether their rules or scheme booklet need amending to reflect the right to NCL. 

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Morgan Lloyd Trustees v Revenue and Customs Commissioners

The Upper Tribunal (UT) has given some clarity on the time limit for applying for a scheme sanction charge to be discharged. 

Morgan Lloyd Trustees Limited (MTL) was the trustee and administrator of numerous pension schemes, many of them small self-administered schemes (SSASs) set up by small employers. Various transactions with the employers had attracted the attention of HMRC, resulting in unauthorised payments charges and surcharges on the employers, as well as assessments against MTL for scheme sanction charges. 

MTL applied to be discharged from the scheme sanction charges. The question arose of whether its applications had been made within the six year time limit. 

When does the six year time limit for an application to be discharged from scheme sanction charge start to run? 

A scheme administrator faced with a scheme sanction charge may apply to be discharged from the liability “not later than six years after the end of the accounting period to which it relates” (reg 3, Regulations 2005/3452). 

The Upper Tribunal rejected MTL’s argument that the six year period ran from the end of the accounting period in which HMRC made the assessment to tax. MTL’s application was to discharge the liability to tax – which arose in the year in which the unauthorised payment was made, not at the time of any future assessment by HMRC. 

It followed that MTL’s applications had been made out of time. 

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Authored by the Pensions team.