The Pension Schemes Bill made it to its second reading before it had to be shelved when the General Election was called. However, it has now been reintroduced, in the House of Lords, in much the same form, with only minor changes to wording in some places. The Bill covers:
- powers for the Pensions Regulator,
- the introduction of Collective Money Purchase schemes,
- changes to the Scheme Funding régime and
- the Pensions Dashboard.
Powers for the Pensions Regulator (“TPR”)
Contribution Notice régime
The Bill extends the Contribution Notice (“CN”) regime, under which TPR may require an individual or a company to pay money into a scheme. Two new grounds for a CN are introduced:
- the employer insolvency test, where a party’s action or failure to act reduces materially the debt that may be recovered by the scheme, and
- the employer resource test, where a party’s action or failure to act reduces materially the resources of the scheme employer relative to the scheme’s estimated section 75 debt.
TPR can issue a CN only if it is reasonable to do so. The Bill extends the list of matters that TPR can take account of when assessing reasonableness. Failure to comply with a CN will become a criminal offence, punishable by a fine.
Other new criminal offences
The Bill introduces two other new criminal offences, each of which is punishable by a fine and/or imprisonment for up to 7 years. The two offences are the avoidance of an employer debt and conduct that risks accrued scheme benefits.
Information gathering
The Bill extends the notifiable event framework, prescribing more detail that must be provided in respect of notifiable events. Failure to notify TPR, or knowingly to provide false or misleading information, will be punishable by a fine of up to £1 million.
TPR’s powers to gather information and to impose penalties for non-compliance with its requests are also extended by the Bill.
Collective Money Purchase schemes
The Bill provides a legislative framework for Collective Money Purchase schemes. These are schemes with a fixed rate of contribution, that provide a target level of benefit to members. Unlike in a defined benefit scheme, if the assets are insufficient to meet the value of the target benefits granted, the benefits may be adjusted accordingly. These provisions are, initially, in response to demand from the Royal Mail and the Communication Workers’ Union, who have undertaken to establish such a scheme.
Scheme Funding
The Bill requires trustees to set a funding and investment strategy, to include the funding level the trustees aim to achieve, and the investments they intend to hold, on a specified future date or dates. Regulations may prescribe actuarial assumptions to be used for this purpose. Trustees will have to consult the employer and produce a statement of the funding and investment strategy, setting out:
- the extent to which the strategy is being implemented successfully and the steps to be taken (if necessary) to remedy the position,
- the main risks to the strategy and how they will be managed or mitigated and
- reflection on significant decisions taken in the past.
Technical provisions will have to be set in a manner that is consistent with the trustees’ strategy and actuarial valuations will have to be sent to TPR (currently only a summary is submitted to TPR).
Fines may apply for non-compliance.
Pensions Dashboards
Dashboards are online services that will enable individuals to see information relating to all their pension arrangements in one place. The Bill stipulates requirements that commercial dashboards will have to satisfy and imposes requirements on trustees to provide certain information to the dashboards. Such information will include not just details relating to members’ entitlements but also information about a scheme’s constitution and its finances.
Transfer values
The Bill introduces new restrictions into the legislation about transfer values, with the aim of preventing transfers to scam vehicles.