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Treasury reforms announced in financial services – pensions measures

United Kingdom |  Publication |  December 2022

The Government has announced a set of reforms to drive growth and competitiveness in the financial services sector. In “The Edinburgh Reforms”, Chancellor Jeremy Hunt unveiled the Government’s plans to take forward its ambition for the UK to be the world’s most innovative and competitive global financial centre. His statement can be read in full here. 
 
Pensions-related proposals include:
  • A commitment to accelerating the pace of consolidation, with a DWP consultation in the New Year “leading the way” on a new Value for Money framework, alongside the FCA and the Regulator, which will set required metrics and standards in key areas such as investment performance, cost and charges and quality of service that all schemes must meet.
  • Plans to reform Solvency II, which is intended to facilitate investment by insurers in long-term productive assets.
  • Following its earlier consultation, laying regulations early in 2023 to remove well-designed performance fees from the pensions regulatory charge cap (see our October 2022 update for details). New regulations are expected to be in force by April 2023.
  • Consultation, in early 2023, on new guidance to the Local Government Pension Scheme (LGPS) in England and Wales on asset pooling. The Government will also consult on requiring LGPS funds to ensure they are considering investment opportunities in illiquid assets such as venture and growth capital, as part of a diversified investment strategy.
  • HM Treasury and HMRC have published a joint consultation on proposals relating to the VAT treatment of fund management services. Until now, there has been uncertainty over the scope of the VAT exemption contained in the EU VAT Directive 2006 relating to the management of special investment funds (SIF). The consultation proposes providing legal clarity by codifying the existing position under UK VAT law and retained EU law. This would include establishing defined criteria to determine which funds are entitled to the SIF exemption.


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