The next Pensions Bill
01 November 2019
This article was featured in the November 2019 issue of the magazine.
Ian Neale, director, Aries Insight, forecasts what might be included
Though we are mired in Brexitation at the time of writing, it’s possible that by the time of publication the fog might have cleared a little: a Queen’s Speech has been pencilled in for 14 October. We haven’t had one of those since 21 June 2017. Marking the opening of a new parliament, it sets out the government’s plans for legislation.
Strong expectations have been raised that the Queen will announce a new Pensions Bill. Some would say this is well overdue, and not just because the pace of legislative change has slowed. (We had Pensions Acts in 2004, 2007, 2008, 2011 and 2014, plus Pension Schemes Acts in 2015 and 2017.) Quite a queue for new legislation has formed at the Department for Work and Pensions (DWP).
The pensions minister, Mr Opperman, has virtually promised a Pensions Bill, not least to provide for collective defined contribution schemes the framework which is required to enable the deal agreed between Royal Mail and the Communications Workers Union. The DWP has had plenty of time to draft this over the past year.
...Some powers may even be made retrospective...
Likewise, we might expect something to realise pensions dashboards. Last December the pensions minister promised to legislate (“when parliamentary time allows”) to maximise pension scheme participation, while stopping short of full compulsion: it’s likely that one-member schemes will be exempted, and maybe other micro schemes. However, no proposal has yet emerged for the format in which defined benefit (DB) schemes will be required to provide data on members’ accrued rights – a much greater challenge than members’ money purchase pots.
Progress on this initiative has been painfully slow. It’s almost five years since the Financial Conduct Authority first proposed a pensions dashboard. Since then, the Money and Pensions Service (MAPS) – created by a merger of the Money Advice Service, the Pensions Advice Service, and Pension Wise – has been tasked with convening an industry group to plan development of a non-commercial dashboard. Legislation might have to wait a while yet.
What else can we expect the Bill to include? One racing certainty is changes to the DB funding rules, following last year’s DWP white paper. The already wide-ranging enforcement powers The Pensions Regulator (TPR) has will be strengthened. Company directors who engage in ‘wilful or grossly reckless behaviour’ will be committing a criminal offence and risk punitive fines and disqualification (if convicted). Some powers may even be made retrospective.
TPR will revise its DB funding code of practice, focusing on what constitutes ‘prudence’ in assessing liabilities and what factors are appropriate to take into account for recovery plans. Scheme sponsors dismayed in recent years by the lack of impact of huge extra contributions in reducing liabilities will not find much to encourage them. TPR will strongly emphasise the need for trustees to take a long-term view when setting the funding objectives.
An authorisation and accreditation regime governing so-called ‘superfunds’ is another likely candidate for the Bill. Scheme consolidation has been a favourite government theme in recent years, as shown by the drive to ensure a robust master trust authorisation regime for defined contribution pensions. Corralling DB schemes is not so easy, though, as the white paper recognised with phrases like “a delicate balance must be struck” and DB “structures can be complex”.
Two years ago, the government said it would limit the statutory right to transfer; the idea being that members exercising such a right between occupational pension schemes will have to provide evidence of an employment link with the receiving scheme. No more has been heard of this, but it might reappear in the Bill.
In August this year, the DWP confirmed plans to legislate for a new system for early resolution of disputes before a determination by the Pensions Ombudsman (TPO). It also intends to allow an employer to make a complaint or refer a dispute to TPO on behalf of itself. (Presently the Pension Schemes Act 1993 prevents an employer from itself bringing a claim against the provider or administrator, e.g. in respect of maladministration of a group personal pension.) This too could be in the Bill.
Other, less likely, candidates include proposals for changes to the automatic enrolment regime, announced in December 2017. The minimum age for eligibility is to come down from 22 to 18 and the lower earnings limit scrapped so that contributions are calculated from the first pound of earnings. The upper age limit is to remain aligned to state pension age – which is not itself expected to be mentioned in the Bill.
Of course, many government departments and their new ministers will be jockeying for their pet plans to be mentioned by the Queen. In all the horse-trading, it’s quite possible the pensions minister will have to settle for a much slimmer Pensions Bill than he would like.