The Pension Schemes Bill 2020 introduces significant changes to the UK's existing legislative framework in respect of defined benefit pension schemes including the introduction of a new criminal offence for anyone engaging in conduct that detrimentally affects in a material way the likelihood of accrued scheme benefits being received. Whilst the intention of the Bill is to prevent material detriment to pension schemes in the context of corporate activity, concerns have been raised around whether the unintended consequences may in fact be uncertainty and disruption for businesses with a defined benefit scheme or anyone who wants to do business with the sponsor of a defined benefit scheme.
We have previously blogged on the key features of the Bill, which in addition to this strengthening of the Pensions Regulator's powers, also include provisions to enable pensions dashboards; new scheme funding requirements; statutory transfer right limitations; and a framework for “collective money purchase schemes” (otherwise known as collective DC, or “CDC” schemes).
The Bill has now completed its committee stage in the House of Lords with the third and fourth sittings of the committee taking place on 2 and 4 March 2020. Amendments agreed during the committee stage include regulation-making powers to enable the Government to impose new duties on pension scheme trustees intended to ensure effective governance in relation to climate change; and an extension of the new limitations on transfer rights so that they also apply to unfunded public sector schemes. The Bill now needs to go through to its report stage in the House of Lords which is scheduled to begin on 30 June 2020. It is not clear how long it may take thereafter for the Bill to complete its journey through parliament and become law.
One of the key areas of concern for those in the pensions industry appears to be that the criminal sanctions go beyond was originally envisaged and it remains to be seen whether there will be sufficient political traction for significant changes to be made to these powers at the next stage. The expectation is that guidance will be issued by the Pensions Regulator on how it intends to apply these sanctions and in the absence of changes to the legislation, it is hoped that this will be robust enough to address these concerns.
We will continue to monitor the progress of the Bill and report further on any significant developments. If you would like to discuss anything raised in this blog, please get in touch with your usual contact at Brodies.