15 November, 2019
The long-awaited Pension Schemes Bill was published on 16 October, detailing amongst other issues the proposed framework for collective defined contribution, new powers and sanctions for The Pensions Regulator and enabling provisions for Pension Dashboards.
It also amends the 2004 Pensions Act provisions on scheme funding, requiring trustees to establish and maintain a 'funding and investment strategy'. In respect of the long-term funding objective, trustees will be required to have a documented strategy for ensuring that enduring pensions and other benefits under the scheme can be provided. This strategy will need to specify the intended funding level at specified future dates and the investments the trustees intend to hold.
The trustees will need to periodically submit this strategy to The Pensions Regulator alongside a statement setting out; the extent to which the strategy is being successfully implemented and, where it is not, the steps they propose to take to remedy this; the main risks faced by the scheme in implementing the strategy and how these will be mitigated or managed; and reflections on any significant decisions taken that are relevant to the strategy, including any lessons learned.
The Bill also amends The Pension Regulators contribution notice powers to add new tests to the 'material detriment test'. The Regulator will also have new fining powers and anyone found guilty of an offence could face a seven-year jail term. The notifiable events regime is also extended resulting in the possibility of a fine of up to £1 million for failing to report.
The Bill also sets out a framework creating a Pensions Dashboard service. The aim is to enable people to see all their pension savings in one place. All schemes will be required to provide the necessary data to be included, with penalties for non-compliance. The mechanism for implementing this scheme will be set out in subsequent Regulations.
Notably, there is no change to State Pension provisions, despite an ongoing challenge by women against state pension inequality. The European Court of Justice has recently handed down its decision in a case relating to the equalisation of normal pension ages for men and women. The ECJ concluded that schemes cannot retrospectively equalise benefits on the less favourable basis, even where this is permitted by UK law and the scheme rules.
Additionally, the Bill makes no commitment to lowering the age for auto-enrolment to 18 and scrapping the qualifying earnings.
For more information contact Rosalind Leahy in our Employment & HR department via email or phone on 01772 220185. Alternatively send any question through to Forbes Solicitors via our online Contact Form.