New legislation is here which will be of keen interest and importance to all trustees of UK Defined Benefit (DB) schemes as well as management boards, shareholders and bank funders associated with a DB scheme.
The Pension Schemes Act 2021 (“The Act”) means significant changes are afoot for the industry through a strengthened regulatory regime and, wider ramifications and implications for all stakeholders associated with a DB scheme.
The Act received Royal Assent in February this year, following a protracted journey through the UK Parliament. The Bill was first introduced in October 2019 and is primarily aimed at strengthening the powers of The Pensions Regulator (TPR) in order to protect UK Defined Benefit Scheme members.
This has been followed closely by the recent press regarding the high-profile Silentnight case, wherein in 2011 a significant DB scheme was left stranded following the sale of a business to a private equity fund, in a what is commonly known as a “pre-pack” insolvency. This case recently reached a judgement whereby significant corporate and personal fines, as well as strong sanctions, were levied against some of the key parties involved.
The Act is broad-ranging and ambitious with significant change across a variety of areas. The provisions of the Act include:
- Stronger TPR powers: new offences which have a penalty on conviction of an unlimited fine and/or imprisonment for up to seven years. Alternatively, these offences can be dealt with by way of a new civil penalty, introduced by the Act, of up to £1 million. Scheme advisers and others who knowingly assist in such conduct could also be considered to have committed a criminal offence under the Act and therefore also risk criminal charges.
- Changes to Defined Benefit (DB) scheme funding: changes to the regime for the funding of DB schemes have been prompted by major recent corporate failures where pension schemes and their members were adversely impacted. A twin-track approach to compliance with a new DB funding code of practice is being proposed by TPR: a fast-track route and bespoke route.
- Climate change governance and reporting: DB schemes will now be required to establish specific governance arrangements to manage climate-related risks and to produce Task Force on Climate-related Financial Disclosures (TCFD), making this information available on a public website.
- Pensions dashboards: The Act supports the implementation of pensions dashboards, which should over time enable people to view all their pension savings in one place.
- Transfer scam prevention: new conditions on transfers will enable scheme trustees to refuse members the transfer of their pension pot if, the destination scheme does not have the appropriate authorisation or, where the member has not supplied evidence of employment or residency.
- Collective money purchase schemes: The Act provides for a framework for the establishment of collective money purchase schemes.
If you are interested in learning more about The Act and its practical implications, please join Mazars and Burges Salmon on Thursday 16 September 2021 at 10 am for an insightful and interactive webinar on what to expect.
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