There are a number of significant legislative and regulatory changes coming into force on the 1st October 2021, including new pensions criminal offences and financial penalties, new contribution notice triggers and new governance and disclosure requirements for defined contribution occupational pension schemes. To help you keep track of these we have summarised the headline changes and who will be affected by them in the table below.

LEGISLATION / REGULATION / GUIDANCE  AFFECTED PARTIES HEADLINE CHANGES
Pension Schemes Act 2021 (PSA21) – New criminal offences
  • Companies and groups with DB schemes
  • Trustees of DB schemes
  • Investors and lenders
  • Advisers
 

  • The new criminal offences are:
    • avoidance of employer debt
    • causing a material detriment to a DB scheme, and
    • failing to comply with a contribution notice.
Pensions Regulator (TPR) – Draft policy: Our approach to the investigation and prosecution of the new criminal offences
  • Companies and groups with DB schemes
  • Trustees of DB schemes
  • Investors and lenders
  • Advisers
  • The draft policy sets out the factors the Regulator will take into account in:
    • determining whether to prosecute an individual or entity for the new pensions criminal offences.
    • assessing whether a person has a “reasonable excuse” for their actions.
  • The draft policy highlights the importance for directors and other parties of:
    • considering the impact of corporate activity on a DB scheme and the steps that could be taken to mitigate this, and
    • maintaining contemporaneous written records of this as part of the corporate decision-making process.
PSA21 – New financial penalty of up to £1 million
  • Companies and groups with DB schemes
  • Trustees of DB schemes
  • Investors and lenders
  • Advisers
 

  • The Regulator will be able to impose a financial penalty of up to £1 million in the following circumstances:
    i. failure to comply with a contribution notice
    ii. avoidance of an employer debt
    iii. conduct risking accrued scheme benefits
    iv. provision of false or misleading information to the Regulator or trustees, and
    vi. failure to notify the Regulator about a notifiable event.
  • Events i to iii are also covered by the new criminal sanctions.
PSA21 – New contribution notice (CN) triggers
  • Sponsors of DB schemes
  • Connected and associated persons
  • The two new triggers are:
    1. Employer insolvency test – broadly, has an act or failure to act materially reduced the amount of the section 75 debt likely to be recovered by the scheme on a hypothetical insolvency  of the sponsor immediately after the relevant act or failure?
    2. Employer resources test – broadly, has the act or failure to act materially reduced the value of an “employer’s resources” relative to that employer’s estimated section 75 debt?
The Pensions Regulator (Employer Resources Test) Regulations 2021 (draft)
  • Sponsors of DB schemes
  • Connected and associated persons
 

  • These draft Regulations set out how the resources of an employer should be calculated for the purposes of the new ’employer resources test’ CN trigger.
Pensions Regulator: Draft Code of Practice 12: Contribution Notices: Circumstances in relation to the material detriment test, the employer insolvency test and the employer resources test 
  • Sponsors of DB schemes
  • Connected and associated persons
 

  • The draft code sets out how the material detriment, employer resources and employer insolvency CN triggers will be interpreted and applied in practice.
  • It provides examples of the types of circumstances in which a CN might be issued on these grounds.
PSA21 – Regulator’s new information gathering powers
  • Companies and groups with a DB or DC occupational pension scheme
  • Trustees of DB or DC schemes
  • Investors and lenders
  • Advisers
  • Service providers
  • Other third parties involved in running an occupational pension scheme
  • The Regulator’s new powers include:
    • power to compel a person to attend an interview and to answer questions, and
    • extended powers to inspect premises (including where it is considering issuing a CN or a financial support direction).
Pensions Regulator (Information Gathering Powers and Modifications) Regulations 2021
  • Companies and groups with a DB or DC occupational pension scheme
  • Trustees of DB or DC schemes
  • Investors and lenders
  • Advisers
  • Service providers
  • Other third parties involved in running an occupational pension scheme
 

  • These regulations set out:
    • the information the Regulator must include in a notice issued to compel a person to attend an interview
    • how the new inspection powers apply for multi-employer schemes, and
    • the fixed and escalating penalty rates for non-compliance with information-gathering requests.
Draft Occupational Pension Schemes (Administration, Investment, Charges and Governance) (Amendment) Regulations 2021
  • Trustees of DC occupational pension schemes
 

  • The draft regulations contain a number of changes that will affect DC occupational pension schemes, including:
    • a requirement to disclose the net investment returns for their default and self-selected funds
    • DC schemes with total assets of less than £100 million that have been operating for at least three years will be required to assess and report more extensively on the value they offer to their members, and
    • measures to smooth the impact of performance fees on funds subject to the charge cap.
Climate Change Governance and Reporting Regulations 2021

Related guidance:

Draft guidance on governance and reporting of climate related risks and opportunities

Governance and reporting of climate change risk: guidance for trustees of occupational schemes – DWP, June 2021

Aligning your pension scheme with the Taskforce on Climate-Related Financial Disclosures recommendations – PCRIG, Jan 2021

  • Trustees of DB schemes with more than £5 billion worth of assets
  • Trustees of authorised master trusts and collective money purchase schemes
  • Companies and groups with large DC schemes or collective money purchase schemes
  • The primary obligations under these new regulations include:
    1. new governance requirements
    2. scenario analysis
    3. metrics and targets, and
    4. TCFD reporting.
New transfer conditions – The draft Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021
  • Trustees of DB and DC occupational pension schemes
  • Pension providers
  • Administrators
 

  • The draft regulations ( due to be implemented in Autumn 2021) set out four new statutory conditions, one of which must be met before a statutory transfer can proceed. The conditions are
    1. low risk transfer
    2. employment link
    3. transfer to QROPS with residency link, and
    4. no ‘red’ or ‘amber’ flags (although transfer can proceed if only amber flags are present and a member has received specialist scams guidance).

 

Key Contacts

Please contact one of our pensions specialists if you would like to discuss any of the changes shown above or how they might impact your scheme or organisation.

Samantha Brown
Samantha Brown
Head of Employment, Pensions and Incentives, London
+44 20 7466 2249

Rachel Pinto
Rachel Pinto
Partner, Pensions, London
+44 20 7466 2638

Michael Aherne
Michael Aherne
Partner, Pensions, London
+44 20 7466 7527

 

 

 

 

 

 

 

 

 

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