The UK’s Pension Schemes Bill became law today upon receiving royal assent, with the government describing the event as confirming “the biggest shake-up of UK pensions for decades”.
Introduced in the House of Lords in January 2020, the bill completed its passage through parliament last month after the government gave reassurances in relation to proposed funding rules.
Guy Opperman, minister for pensions, said the royal assent made for “a historic day for UK pensions”.
“This Act makes our pensions safer, better and greener, as we look to build back better from the pandemic. Its passage will reassure savers that they can, and will, have a retirement they deserve.”
Now an Act, the legislation provides for change in multiple respects, including by boosting the powers of The Pensions Regulator (TPR) through new criminal and civil sanctions and providing for the creation of collective defined contribution (CDC) schemes.
It also introduces a framework for pension dashboards and provisions for pension fund climate change-related reporting and governance requirements. It also intends to combat the risk of pension scams.
“The most significant piece of pensions legislation in over a decade finally hit the statute books today,” said Claire Carey, partner at law firm Sackers.
“Much of the detail in the Act will be bulked out in regulations, and we await the all-important implementation dates.”
She and other commentators said the TPR’s new beefed-up powers could lead to a resurgence in the use of the so-called voluntary clearance process, whereby companies can inform the regulator when significant activity might affect a defined benefit (DB) scheme.
Mark Grant, head of pensions at law firm CMS, spoke of “a game changer for corporates with DB pensions”.
“Following recent high-profile cases of perceived pension scheme abandonment, non-compliant parties (including individual decision makers) now risk fines of £1m or more, or even imprisonment,” he said.
“The Pensions Regulator’s new weapons should be of concern to any corporate group with a DB pension scheme. With the risk of liability cutting through the corporate veil, all group companies – not just DB employers – urgently need to be familiar with the new regime.”
At TPR, chief executive officer Charles Counsell said the regulator would continue to work closely with the industry and other stakeholders to produce the necessary codes and guidance to ensure measures were introduced in an effective way.
“We are a risk-based and proportionate regulator and this measured approach will continue,” he said. “Our work is driven and directed by the pursuit of our statutory objectives and we use our powers where appropriate and reasonable to do so.”
“The devil will be in the detail of the regulations and guidance to come over the rest of 2021”
Laura McLaren, partner at Hymans Robertson
Large sections of the Act will not come into force for several months, with much detail to be set out in secondary regulations and guidance.
“The regulator has already announced a second consultation for later this year on the new DB funding code of practice, with the new rules almost certainly not coming into operation until into 2022,” said Laura McLaren, partner at Hymans Robertson.
“Engagement and consultation is also expected on the provisions around corporate activity and how the regulator will exercise its expanded arsenal of powers, with these expected to be in play by autumn of this year.”
She added: “As a more complete picture of what compliance will look like across different areas begins to emerge, keeping on top of the potential implications is likely to feature heavily within schemes’ work plans. The devil will be in the detail of the regulations and guidance to come over the rest of 2021.”
Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association (PLSA), drew attention to talk of a further pensions bill, perhaps as soon as next year, which would ideally improve the auto-enrolment framework.
“We hope the government will use it to fulfil its promise to increase the level of automatic enrolment savings so it is based on each pound of earnings and to widen the scope of automatic enrolment so that 18 year olds, rather than only 22 years and above, are included,” he said.
”The government said they would do this by the mid-2020s so a statute in 2022 leading to adoption in the years after would fit the bill.”
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