The pandemic has coincided with an enormous number of consultations (most now concluded) and reforms affecting occupational pension schemes and their sponsoring employers, primarily from the Government and the Pensions Regulator. These can broadly be split into four policy themes:
Protecting defined benefit scheme members
The Pension Schemes Act 2021 is in the process of being brought into force and a number of consultations have resulted in regulations and Pensions Regulator publications. Many aspects are designed to improve benefit security for defined benefit (DB) scheme members. There are implications for scheme funding and corporate activity where there is a DB pension scheme, and new requirements for trustees of all schemes.
Key aspects and commencement dates are as follows.
• Changes to the DB scheme funding regime, requiring a long-term funding and investment strategy, and new valuation expectations in a revised Pensions Regulator code of practice (date not confirmed but currently expected to commence in late 2022 or early 2023). Consultations are expected soon on draft regulations and the new code.
• New grounds for the Pensions Regulator to issue a contribution notice, requiring an employer or associated or connected party to make a lump sum contribution to a DB scheme, including where an act or omission would, hypothetically or actually, reduce the amount of 'section 75' employer debt likely to be recovered by the scheme from the employer in the event of insolvency (1 October 2021).
• New criminal offences and civil penalties up to £1 million, including for acts or omissions by anyone (not just associated or connected parties) which put DB scheme members' benefits at risk, without a reasonable excuse (1 October 2021). The Pensions Regulator's prosecution policy has been finalised and a consultation is currently open (until 21 December 2021) on three draft other policies in this area.
• Requirements to notify the Pensions Regulator and DB scheme trustees, including at an early stage and later a declaration of intent, in connection with certain kinds of corporate activity – to include material business sales and the granting of security with priority over debt to the scheme (likely to be April 2022). A consultation closes on 27 October 2021.
• Scam protections, in many cases restricting the statutory transfer right and requiring trustees to ensure that the member takes guidance (date not confirmed but currently expected to be November 2021).
For more detail on the Act (including other aspects not covered here), please see our briefing.