The Pension Schemes Bill is due to enter the final “Ping-pong” phase of its passage through Parliament on 19 January 2021. Provided this process is not drawn out, the Bill could receive Royal Assent in a matter of days. In the meantime, the Government has confirmed that the regulatory powers and sanctions contained in the Bill, which are not expected to come into force until autumn 2021, will not be applied retrospectively by the Pensions Regulator.
The Regulator has also confirmed that the second part of its consultation on the new DB funding Code will be delayed until the second half of this year.
The Pension Schemes Bill was first introduced into Parliament in October 2019. It’s passage through Parliament has been delayed first by the 2019 General Election, then by Brexit and, more recently, by the constraints on Parliamentary time caused by the actions needed to manage the spread of Covid-19.
The Pension Schemes Bill contains some significant measures, including:
- new criminal offences where directors and other parties take action which is, broadly speaking, materially detrimental to a defined benefit (DB) scheme
- new regulatory powers, including the power for the Regulator to issue fines of up to £1 million where there are material failings affecting a DB scheme
- new scheme funding requirements, including the need for DB schemes to set a legally binding long-term objective
- powers for the Government to introduce new governance and disclosure requirements relating to climate-related risks.
Click on the links above to read our blogs on these different elements of the Bill.
What is “Ping-pong”?
Ping-pong is when a Bill is sent back and forth between the House of Commons and the House of Lords as they try to resolve disagreements about the final text. The outstanding issues relating to the Pension Schemes Bill include resolving concerns about:
- the scope and potential retrospective application of the Pensions Regulator’s new powers and the new criminal offences
- the treatment of open DB schemes, and
- the steps being taken to prevent pension scams.
It is not anticipated that Ping-pong will last long and, therefore, we expect that the Bill will receive Royal Assent shortly.
Will the Bill have retrospective effect?
Although the Bill is likely to receive Royal Assent in the next few weeks, the new criminal offences and regulatory powers are not due to come into force until the autumn to give the Pensions Regulator time to consult on and issue guidance on how it will exercise these new powers. Concerns have been raised about the extent to which these new powers may be applied retrospectively and, in a written response to a Parliamentary question on this, the Pensions Minister, Guy Opperman, has confirmed that:
“None of the provisions in Part 3 of the Bill [which contains the new regulatory powers and criminal offences] will be retrospective and the new criminal sanctions and information gathering powers will apply to all schemes where the act occurs, or in the case of a series of acts commences, after the powers come into force.”
This should help to address the concerns expressed by some peers and MPs and by some in the pensions industry. However, it is still important that directors and other corporate stakeholders associated with DB scheme sponsors have regard to these new powers immediately when making decisions as it is still likely that the Regulator could have regard to actions and decisions taken now when deciding whether or not it is reasonable to exercise these powers where a trigger event occurs after the new powers are in force. In addition, even though it appears from the Minister’s statement that actions and decisions taken prior to these powers coming into force will not be capable of triggering the exercise of these new powers, once the powers are in force, they could be triggered by any related acts (such as restructuring or re-financing) that take place after that time.
New Funding Code delayed
In an interim response to the first part of its consultation on the new DB funding Code, the Pensions Regulator has confirmed that it plans to publish the second consultation on its proposed new DB funding code in the second half of 2021 (having originally planned to launch it in Autumn 2020). This is to allow time for the Regulator to consider the 130 responses it has received to the first consultation and to allow for the passage of the Pension Schemes Bill through Parliament and the DWP’s consultation on draft regulations, which are currently expected to be published in the first part of this year.
The Regulator indicated that the second part of the consultation will cover:
- a full summary of the responses to its first consultation and the approach it has taken in light of the responses received and the final legislative package
- the draft code of practice for consultation and its proposed regulatory approach, including developing thinking around the process to review and update Fast Track guidelines, the Regulator’s approach to assessing valuations, engagement with DB schemes and enforcement, and
- an impact assessment and supporting analysis.
Separately, in a recent blog, the Regulator confirmed that it is yet to finalise the proposals for the second consultation as it is still considering the responses received following the first consultation. However, it recognised that some of the proposals may need to be adjusted to reflect the current economic conditions.
The introduction of the new regulatory sanctions and powers contained in the Pension Schemes Bill have been anticipated for several years and it appears as though the Bill is finally nearing the end of its Parliamentary journey. Once the Bill receives Royal Assent all eyes will turn to the Regulator for clarification on how it intends to exercise its new powers. In the meantime, the Minister’s confirmation that the new criminal offences and regulatory sanctions will not be triggered by events occuring before the new powers come into force is welcome.