After its hiatus during the General Election, the Bill was re-introduced to the House of Lords on 7 January 2020. It received its second reading on 28 January 2020. The next stage of the legislative process started on 24 February with the Committee stage during which consideration of the Bill on a line by line basis began. The Committee stage will continue on 26 February, 2 March and 4 March.
The Bill, if enacted, would bring in wide-ranging and significant changes to pensions law and unsurprisingly is not without its critics, particularly in relation to the proposed new criminal sanctions which go far beyond what was originally envisaged.
We have commented on these and some of the other key features of the Bill below.
Strengthening of The Pensions Regulator (TPR) powers
TPR's powers will be bolstered with new civil and criminal offences available to it. Those that risk members' accrued scheme benefits, or avoid an employer (Section 75) debt, could face up to seven years in prison and/or an unlimited fine. Failing to comply with a Contribution Notice will also attract an unlimited fine. These offences mirror the existing triggers for issuing a Contribution Notice, but the civil and criminal offences are new.
Many concerns have been raised by those in the pensions industry that the criminal sanctions go beyond what was originally envisaged. The Association of Consulting Actuaries and the Association of Pension Lawyers (among others) have raised various concerns with the Department for Work and Pensions. Those concerns include Clause 107 of the Bill and whether it could criminalise minor actions and ordinary business activities, increasing the range of people who might be caught by the offences. During the Bill's second reading in the House of Lords, concerns were raised about the scope of Clause 107 with one peer commenting that it "goes significantly beyond the criminal sanction proposed in the consultation which preceded the Bill". There are calls for greater clarity and guidance on how the courts will interpret the proposed new offences. We await with interest any changes or clarifications to Clause 107 which may be introduced to address these concerns.
TPR's investigatory role and its tools for information gathering will also be strengthened, with changes to the notifiable events regime. The details of the changes will be clarified in forthcoming regulations; however, it seems likely following the consultation that these will include a requirement for employers to give notice of the following events "as soon as reasonably practicable":
- the sale of a controlling interest in the sponsoring employer;
- the sale of the business or assets of a sponsoring employer; and
- any security granted in priority to scheme debt.
New "Statements of Intent" will have to be submitted to TPR and the relevant scheme trustees, notifying them of any one of these events. TPR will have powers to sanction parties that do not co-operate with the new reporting rules as well as the power to impose fines where false or misleading information is provided to it or the trustees.
It is not yet clear what impact the changes to the notifiable events regime will have on corporate transactions and corporate activity generally and there has been much debate on what will be included in the regulations. There has also been some criticism that the detail surrounding such a significant issue with a potentially major impact on corporate activity has not been included in the Bill itself and will instead be contained in secondary legislation. Greater clarity will hopefully come when the relevant regulations are available.
Pensions dashboard
Building on previous discussions, the Bill provides for a pioneering new dashboard system, offering an online service that allows people to view all their pension information in a single place. The aim is to aid peoples' retirement planning by allowing them to view their information on a consolidated platform and the proposal has generally been welcomed by the pensions industry. It is still unclear exactly when schemes will be required to provide information to the new dashboard provider(s) and how onerous the requirements will be.
New Scheme funding requirements
The Bill also focuses on securing the longevity of defined benefit scheme pensions and benefits. Scheme trustees will be required to produce a funding and investment strategy specifying which investments the trustees intend to hold, and the intended funding levels. The scheme's funding and investment strategy must be agreed with the employer and trustees must consult with the employer on the written statement of the strategy.
Statutory transfer right limitations
Changes to the statutory transfer requirements will give trustees greater powers to prevent transfers going ahead where they have concerns about the scheme to which the member is seeking to have funds transferred. The Bill imposes restrictions on the right to a statutory transfer unless prescribed conditions are met.
Collective money purchase scheme (CMPS)
A significant proportion of the Bill deals with new legislation for CMPSs and provisions needed to introduce the legal and regulatory framework for this type of scheme. The framework for CMPSs proposed by the Bill is similar to the framework in place for master trusts. Risks and investments in a CMPS are pooled, the aim of which is to generate increased benefits in comparison with those usually obtained in a money purchase scheme. CMPSs will have to apply to TPR for authorisation to operate and must meet certain conditions. One of the concerns raised about them in the Bill is that many of the detailed provisions are to be made in secondary legislation - not all of which will require Parliamentary approval.
What Next?
There are many issues covered by the Bill which require greater clarity and hopefully this will become available as the Bill makes its journey through the House of Lords. There can be no doubt that the Bill contains significant changes to many areas of pensions law, however there are areas that were expected to be addressed by the Bill which have not been; e.g. changes to TPR's powers to impose Financial Support Directions, authorisation and supervision regime for DB consolidation vehicles or adjustments to the GMP conversion legislation to facilitate its use as an equalisation solution.
Scrutiny of the Bill will resume on 26 February, 2 March and 4 March as the Committee Stage continues, during which we will hopefully see the various concerns addressed and clarity provided before the Bill becomes law.
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