Pensions Acts can be significant pieces of pensions legislation. For example: Pensions Act 2004 introduced the current scheme funding regime and the Pension Protection Fund; Pensions Act 2008 introduced the framework for automatic enrolment; and Pensions Act 2014 abolished contracting-out and brought in the new State Pension.

So what might we expect to see in the next Pensions Bill?

Strengthened powers for the Pensions Regulator

The government has been looking to strengthen the powers of the Pensions Regulator (TPR) to address issues that have arisen in some pension schemes and high profile cases. There have been consultations on the government’s plans in this area and the Pensions Bill is expected to include legislation to:

• Give TPR powers to punish those who deliberately put their pension scheme at risk, by introducing punitive fines;                

• Introduce a criminal offence to punish those found to have committed wilful or grossly reckless behaviour in relation to a pension scheme; and                

   

• Strengthen TPR’s information gathering powers and the framework that requires employers to take pension considerations into account in corporate transactions.

There is expected to be changes to what employers need to provide, especially when there are corporate transactions, so this aspect will be an area to look out for within the text of the Pensions Bill.

Changes to the scheme funding regime

The White Paper had announced plans for consultation on a new defined benefit scheme funding Code of Practice and the Pensions Bill is expected to facilitate this.

Although a formal consultation has not commenced, TPR has recently outlined some thoughts about the new Code within a blog on the TPR website. The main items to note from the blog are:

•  TPR does not intend to pursue a ‘one size fits all’ MFR 2.0 style framework and states “there will be scope for schemes to choose a more bespoke approach subject to further evidence being provided and greater regulatory scrutiny”;                
• TPR plans to issue two consultations on the new Code:  

• The first is expected in summer 2019, although TPR notes that the timing depends on the legislative timetable. Given that this is likely to be a reference to the timing of the launch of the Pensions Bill itself, it may be that the first consultation is launched after summer has ended; and

• The second is expected in 2020 once TPR has “more clarity on the intended primary and secondary legislative package”.          

• TPR plans for the consultation on the new Code to cover the setting of: 

• A suitable long term objective (LTO) for both open and closed schemes, with the LTO concept – and how trustees achieve a scheme’s Statutory Funding Objective based on the LTO – being at the heart of the revised Code;                

   

• Assumptions to reflect the scheme’s circumstances, such as scheme maturity or covenant strength; and                

• Acceptable recovery plan lengths for different covenant strengths.

The consultations on the Code are likely to include significant items for both the Trustee and employers, as the final code will impact future valuations.

Collective Defined Contribution Schemes

The government has recently consulted on collective defined contribution (CDC) schemes. The outcome of the consultation is expected to influence the Pensions Bill, which is likely to include clauses to support the framework for the operation of CDC schemes in the UK, such as the one proposed by Royal Mail.

Defined Benefit Consolidation Schemes

At the time of writing this update, the government has not provided its response to the consultation. However, the Pensions Bill is expected to put forward a legislative framework for authorising and regulating defined benefit consolidation superfund schemes.

Defined benefit consolidation schemes are expected to become a more common alternative to the traditional buy-in/buy-out route for schemes that are closed to accrual.

Changes to the State Pension Age

Previous Pensions Acts have included legislation to make changes to the State Pension Age. In 2017, the government announced plans to bring forward the increase of the State Pension age to age 68 so that it would apply between 2037 and 2039. This impacts employees born after 5 April 1970.

These plans have not yet been brought into law, so this may be done using the Pensions Bill.

Pensions Dashboards

Pensions Dashboards are to be introduced as a way to help people to see information about all their pension savings, including their State Pension, in one place.

The Pensions Bill is therefore expected to include legislation to support the government’s plans in this area, such as putting in place requirements for pension schemes, such as the RPS and the BTPFSF, to supply data securely to the Pensions Dashboards providers. It is not yet known what the requirements and timings will be for this data provision, although the consultation response referred to the majority of schemes providing data within a three to four year time frame.