The Pension Schemes Bill has been granted Royal Assent today, ushering in major changes to pension schemes aimed at providing greater protection for members.
The move sees the Bill become the Pensions Schemes Act, almost three years after it was first mooted in response to the BHS and Carillion pension scheme scandals, which slashed the value of thousands of workers’ pensions at both organisations.
Announcing the enactment, minister for pensions Guy Opperman, said “This is a historic day for UK pensions and I’m thrilled that after more than 12 months, amidst all the challenges we’ve faced, the Bill has now received Royal Assent.
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“This Act makes our pensions safer, better and greener, as we look to build back better from the pandemic. Its passage will reassure savers that they can, and will, have a retirement they deserve.”
The Act will strengthen protections for pension savers by extending the powers of the Pensions Regulator (TPR), introducing the power to issue civil penalties of up to £1 million, alongside three new criminal offences.
A tough new sentence has been created, with a maximum penalty of seven years in prison, for employers who run pension schemes into the ground or plunder pots to line their own pockets.
It is aimed at deterring employers from making reckless decisions with their defined benefit (DB) schemes and strengthening the Regulator’s powers to take rapid action to protect members’ savings.
The introduction of pensions dashboards will create one single platform making it easier for savers to access and review pension pots, calculate their monthly retirement income and learn how to improve their retirement prospects.
Schemes will also be required to manage the effects of climate change as a financial risk and disclose how they have achieved this.
The Act also legislates for the creation of a new collective defined contribution (CDC) scheme. Developed in co-operation with trade unions, it allows a collective fund to be shared between all scheme members, rather than each member saving into their own individual pot, with the aim of increasing returns for scheme members whilst remaining sustainable for employers.
Kate Smith, head of pensions at Aegon, said: “Finally, after a long and winding road the Pensions Schemes Bill 2019-21 has received Royal Assent and becomes the Pension Schemes Act 2021. Delayed due to the triple whammy of Brexit, UK national elections and Covid-19, it’s had a bumpy ride.
“It will protect pension savers by giving the Pensions Regulator new stronger powers and tightens the rules around pension transfers giving greater protection against pension scams. It will make pensions greener, by compelling larger occupational schemes to report annually to their members and the public on their exposure to climate-related risks and opportunities. It’s also a massive leap forward in making pension dashboards a reality, helping people to reconnect with their pension savings.”
Laura McLaren, partner, Hymans Robertson said: “It is great to see the Pensions Schemes Bill finally complete its long journey through parliament and receive Royal Assent.
“However, although the new Pension Schemes Act lays the foundations for changes to many areas of pensions legislation, it is really just the first step. While the Act establishes a lot of important primary legislation, much of the underlying detail is left to secondary regulations and guidance that will now need to be drafted, consulted on and implemented over the coming months.
“As a more complete picture of what compliance will look like across different areas begins to emerge, keeping on top of the potential implications is likely to feature heavily within schemes’ work plans. The devil will be in the detail of the regulations and guidance to come over the rest of 2021.”