Although making any kind of political prediction at present is a fool’s errand, it seems to be a question of when, rather than if, we get the next Pensions Bill. The indications are that a Bill will be included in the next Queen’s speech. It now appears that this will take place “at the end of May”. However, with the timing of her departure still unknown, your bet is as good as mine as to when the Bill will actually emerge.
But, what can we expect when it is finally introduced?
What do we already know?
Many of the headline measures are already known. For example, we can expect the Bill to contain:
- the proposed new powers for the Pensions Regulator
- a new regulatory framework for DB consolidators
- measures to enable Royal Mail to establish its collective DC (CDC) scheme, and
- measures to facilitate the creation of online pension dashboards.
However, much of the detail associated with these proposals is still to be confirmed. So what should you look out for when the Bill is published?
New powers for the Regulator
The Government’s response to the consultation on strengthening the Pensions Regulator confirmed its plans to give the Regulator new powers and to strengthen and streamline the existing regulatory framework. However, much of the detail was said to be subject to further consideration. Therefore, when the Bill is introduced attention will focus on:
- the precise terms of the new criminal offence of wilful or reckless behaviour
- the timing and content of the new Declaration of Intent which corporate sponsors will need to issue to the Regulator and trustees on corporate transactions and re-financing
- the timing of the notification requirements linked to the proposed new notifiable events, and
- the terms of the proposed new scheme-based tests for issuing financial support directions (which will be renamed ‘financial support notices’).
The Government’s response to its consultation on DB consolidation is still awaited. Whilst it appears, in principle, to support the establishment of DB consolidator vehicles, the success of these arrangements will to a large extent depend upon the terms of the regulatory framework that the Government puts in place. In particular, the ability of consolidators to offer more favourable pricing than buy-out providers and to reassure apprehensive trustees will depend upon:
- the relative strength of the funding requirements that will apply to DB consolidators compared with insurers
- the terms of the “regulatory gateway” (if any) that is introduced to limit the schemes that can transfer to a consolidator, and
- the extent of the Regulator’s powers to effectively supervise consolidator vehicles (and the associated buffer funds).
The current impetus to introduce legislation to facilitate the establishment of CDC schemes has been provided by the Royal Mail’s wish to introduce a CDC scheme for its staff. When the draft legislation is published it will be interesting to see to what extent, if any, the legislation provides scope for different CDC models to be developed. The nature of the disclosure requirements will also be significant given how crucial member communications will be to the long-term success of these arrangements.
The Government has also given the green light to the creation of online pension dashboards. We can expect the Pensions Bill to contain a power to enable the Secretary of State to phase in a requirement for pension schemes and providers to supply data to the dashboards. However, the Bill is unlikely to shed any more light on the type of data that will need to be provided or the timetable according to which different sizes and types of scheme will be required to supply this information. Those details have been left for the industry steering group, to be formed by the Money and Pensions Service, to determine.
What else can we expect?
Alongside the headline changes that have already been consulted on, it is also likely that the Bill will contain changes to:
- the scheme funding regime – to require DB schemes to set a long-term objective, although the critical thing to look out for will be whether there is any attempt to introduce a statutory requirement for schemes to fund towards this
- the GMP conversion legislation – to clarify areas of uncertainty, such as how the employer consent requirements operate where former employers have left the scheme and the level of benefits that need to be provided to dependants, and to streamline the process, for example, by removing the requirement to consult affected members, and
- the role and powers of the Pensions Ombudsman – for example, to enable it to help parties reach a settlement through mediation.
It would also not be surprising if the Bill contained measures which:
- place additional restrictions on statutory transfers to help combat pension scams, such as restoring the need for an employment link where there is a transfer to an occupational pension scheme, and
- introduce a requirement for defined benefit schemes to produce a Chair’s statement.
So, there will be much to look out for when the Pensions Bill is finally unveiled. Whenever that may be.