A new pensions bill received royal assent yesterday (11 February 2021) that aims to strengthen protections for pension savers by extending the powers of the Pensions Regulator, introducing the power to issue civil penalties of up to £1m, and three new criminal offences. Some in the sector, however, have queried possible unintended consequences.
The Pensions Schemes Act creates a new sentence – with a maximum penalty of seven years in prison – for bosses who run pension schemes into the ground, or use pots for personal gain.
Ministers hope this will deter employers from making reckless decisions with their defined benefit schemes and that it will strengthen the regulators’ powers to protect members’ savings.
The new act, says the government, introduces “pensions dashboards” in a “digital revolution” for savers, creating one single platform for them to more easily access and review pension pots. The dashboard is a digital interface that enables people to see all their pension savings in one place allowing individuals to make better decisions about their retirement plans.
Savers should now be able to see how much they can expect each month in retirement, and find out how they can improve their retirement prospects.
Through climate risk reporting the act is designed to play a role in “our transition to a net zero future” according to the government. It also establishes requirements around pension scheme funding to improve financial sustainability.
A new style of pension scheme – collective defined contributions (CDCs) – are now possible under the act. This model was developed in conjunction with trade unions and would, claimed pensions minister Guy Opperman, increase returns for millions of people, while being more sustainable for both workers and employers.
For Graeme Riddoch, head of proposition at pension scheme administration provider Mantle, the new act is a significant development for a system that is frequently tweaked.
He said: “Since 1993, we have been averaging an act of parliament on pensions every three years. This act is probably one of the most important since 2004 in the sense that it touches all types of schemes and impacts on trustees, employers, members, regulators and service providers and administrators.
Riddoch was cautious over the advent of the pensions dashboard: “For the pension dashboard, data standards are the starting point but depending on phasing, schemes will need to return retirement figures periodically. That’s an expensive off-the-side job if the platform isn’t capable, and not a long-term solution. Platforms need to be able to automate all calculations as in time the pensions dashboard will be seen as the minimum requirement.”
Deloitte’s Simon Kew, head of strategy and relationships, financial advisory-pensions, was also cautious about aspects of the act, saying that the new criminal offences could have negative impacts on the sector. He concluded in a blog post: “The ‘good intention’ of the Bill is to prevent material detriment to pension schemes, the unintended consequence may be disruption and uncertainty for businesses in the UK – the very companies that pension scheme trustees invest in and scheme members are employed by.”
Opperman said: “This is a historic day for UK pensions. 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.”