Pension industry professionals, employers and trustees alike have been keenly awaiting changes to the pensions landscape brought in under the Pension Schemes Act 2021 (PSA). While we expect further legislation to expand on and clarify further areas, important provisions contained in the PSA come into effect on 1 October 2021 as well as related regulations. The areas covered include:
- Climate change governance and reporting
1 October 2021 sees the taking effect of governing regulations under which the phasing in of new governance and reporting requirements will start for trustees of large schemes, authorised master trusts and collective money purchase schemes. We expect guidance to be issued on this in due course.
- New “moral hazard” powers for the Pensions Regulator (TPR)
Coming into force on 1 October 2021, under the PSA, are the two new grounds for TPR to issue “contribution notices” (CN), based on “employer insolvency” or “employer resources” tests. For further insight into TPR’s views and approach, we await TPR’s updated Code of Practice 12, “Circumstances in relation to the material detriment test, the employer insolvency test and employer resources test“, the related consultation having closed on 8 July 2021. TPR’s response has been published on 29 September 2021 and the draft Code is currently lying before Parliament.
New regulations on the employer resources test also take effect on 1 October 2021, confirming, for instance, that the resources of interest will be the employer’s profits before tax.
- New criminal sanctions for certain activities
Under the PSA and from 1 October 2021, there could be an unlimited fine, up to seven years in prison or both for actions risking accrued benefits or avoiding a “section 75” debt. An unlimited fine could be a consequence of failure to comply with a CN. TPR has, in relation to company scheme sponsors, made clear that the intention is not to punish or prevent bona fide and usual corporate activity, and has, on 29 September 2021, published its policy on how it will investigate and prosecute actions risking accrued benefits or avoiding a debt, as noted above.
- New civil fines of up to £1 million
Adding further to TPR’s armoury of powers, the threat of civil fines of up to £1 million in certain circumstances comes in under the PSA, for example, where there has been a risk to accrued benefits by a given act or omission or where there has been avoidance of a section 75 debt.
- TPR’s new information gathering powers
From 1 October 2021, TPR will be able to put into practice its extended powers of inspection of premises and its new power of interviewing individuals. TPR has, today, issued a consultation on its approach to this new power which will close on 21 December 2021.
Watch this space for further updates.