The Pension Schemes Bill at a glance
19th August 2020
The Pension Schemes Bill currently awaiting a third reading in the House of Lords will significantly change the legal and regulatory framework governing defined benefit pension schemes, most specifically by making a wide range of pensions related actions a criminal offence.
It remains doubtful whether Parliament will have time to progress the Bill before the Autumn but to keep you up to date, here is a very quick ‘at a glance’ summary of the key points:
- The Pensions Regulator will have increased powers to issue contribution notices. There will also be new criminal sanctions for anyone who fails to comply with a contribution notice, avoids an employer debt or displays conduct that could put the accrued scheme benefits at risk.
- The Bill will bring in a new requirement for the trustees of defined benefit schemes to come up with a viable strategy that will ensure they can satisfy their ‘end game’, i.e. that their scheme will be able to deliver both the promised income and other benefits over the long term.
- The government is apparently concerned by the number of people being swindled out of their pensions so the Bill will allow members to transfer their pensions to alternative schemes. However, more stringent checks to verify the member’s employment and residence will be required before a transfer can be made.
- The Bill addresses the creation of a third type of pension scheme, the Collective Money Purchase scheme.
With a Collective Money Purchase Scheme – or as they’re also known, the Collective Defined Contribution or CDC scheme – both the employer and employee contribute to a shared fund from which the employee would draw their income from following their retirement.
The reason the government is keen to introduce this type of scheme is that unlike a defined benefit scheme pension, CDC schemes only offer a ‘target income’ that can be adjusted if a scheme is over- or under-funded.
- The Bill includes the creation of a new pensions dashboard service (PDS) to make it easier for members to access up to date information about their pension.
It is envisaged there will be a number of PDS platforms as the Money and Pensions Service will also be obliged to provide information about the entitlements members of occupational and personal pension schemes should expect and trustees will also be expected to make additional information available relating to their schemes via PDS.
As auditors to a large number of pension schemes, if we can help you in any way of you have any questions regarding your audit, please call Robert Radford on 0116 282 7000 or email him at firstname.lastname@example.org.