9: Pension Schemes Bill to be revived in 2020?
The Pension Schemes Bill 2019-20 was announced in the Queen’s Speech on 14 October 2019 and published on 16 October 2019. Due to the general election, the Bill was put on hold. However, the Conservative pre-election manifesto suggested an intention to reintroduce the bill and the result of the general election returning the Conservatives to power makes this ever more likely.
Here is a brief reminder of the key provisions of the Bill that could become issues for trustees and pension schemes in the coming year:
A structure for the provision of a qualifying pension dashboards service. This is an electronic interface that will allow individuals to view all their lifetime pension savings, including their state pension, in one place. The intention is for the Money and Pensions Service to lead development of the dashboard with the wider pensions industry. Trustees of occupational pension schemes and personal pension providers will be required to send information about an individual’s benefits to dashboard services, together with details of the scheme’s constitution, administration and financing. Most of the detailed requirements will be set out in regulations, accompanied by statutory guidance and FCA rules. The DWP’s response to the consultation on pensions dashboards in April 2019 envisaged that these new disclosure obligations would be introduced on a staged basis, starting with large DC schemes, followed by smaller DC and DB schemes.
A framework for the establishment, operation and regulation of collective money purchase schemes (CMPs). This new type of scheme involves the sharing of risk between employer and members and is therefore seen as a viable alternative to DB and money purchase schemes. CMPs may only be used by single or connected employers and will be subject to an authorisation regime similar to the DC master trust regime. A key principle of CMPs is that members receive a pension from the fund but the benefit level provided can only ever be estimated based on facts at the time. The detailed requirements will be set out in additional regulations.
New powers and sanctions for The Pensions Regulator (TPR). The Bill introduces two new tests under which TPR can impose a contribution notice:
- the employer insolvency test, which will, in relation to a scheme in deficit, be met if an act or failure to act of an employer would materially reduce the amount of section 75 debt that is likely to be recovered; and
- the employer resources test, where an act or failure to act of an employer reduces the resources of the employer available to meet the section 75.
It also introduces new criminal offences and sanctions including: failure to comply with a contribution notice, punishable by an unlimited fine; avoidance of an employer debt, punishable by up to seven years’ imprisonment and/or an unlimited fine; and conduct risking accrued scheme benefits, also punishable by up to seven years’ imprisonment and/or an unlimited fine. TPR may also impose fines of up to £1 million may also apply where false or misleading information is provided to TPR or trustees.
A requirement for trustees to maintain a long-term funding and investment strategy to ensure that pensions and other benefits can be provided over the longer term. A scheme’s technical provisions will need to be calculated consistently with this long-term funding objective. Trustees will be required to submit regular statements to TPR setting out the extent to which the strategy is being successfully implemented; details of the main risks and how they will be managed; and reflections on any significant decisions they have taken. Trustees will also be required to consult with the employer in relation to the main risks.
New limitation on a member’s right to transfer, in order to protect against pension scams. Members of occupational or personal pension schemes will not be able to exercise their statutory transfer rights unless they have provided prescribed information to trustees. Details of this new requirement will be set out in regulations but will include information about a member’s place of residence and employment.