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Pension Schemes Act 2021

The Pension Schemes Act 2021 will make significant changes to the legal and regulatory landscape in the UK in a wide range of areas. Here we look at what is coming in and when and the most immediate practical issues for defined benefit pension scheme sponsors and trustees.

What is changing and when?

Much of the detail behind the new measures will be set out in draft Government regulations and related guidance from the Pensions Regulator (TPR) yet to be published.

New Act at a glance When in force
New criminal offences applicable to directors, trustees and wider stakeholders: where there is, without reasonable excuse, ‘wilful or reckless’ behaviour or ‘failure to act’ which adversely affects a DB scheme, which could attract prison sentences of up to 7 years and/or unlimited fines.
1 October 2021
Increased powers for the Pensions Regulator: expanding the circumstances in which the Pensions Regulator (“TPR”) can require payments to the pension scheme from entities associated or connected to a sponsor (e.g. other group companies) – known as contribution notices. TPR will also have extended information-gathering and new interviewing powers.
1 October 2021
Greater oversight and scrutiny of corporate activity: the new requirements increase the need to reflect on and explain the pension impact as events occur including dividend payments, refinancing and restructuring activities. And more events will need to be notified to TPR (e.g. material sales, granting security ranking above pension scheme) with fines up to £1m for failure to do so.
1 October 2021 (new TPR notification requirements Q1/2 2022)
Potentially more stringent scheme funding regulation: includes tougher funding standards and higher contributions to potentially eliminate scheme deficits faster.
Q2 2022
More member protection: new restrictions on the right to a statutory transfer, unless prescribed conditions are met.
Autumn 2021 (consultation closed 10 June 2021)
Additional ESG requirements: new climate change governance and disclosure requirements for pension schemes.
October 2021 (consultation closed 31 August 2021)
New type of pension scheme: ‘collective money purchase schemes’ where member and employer contributions are invested collectively
TBC (consultation closed 31 August 2021)
Pensions dashboard: a new platform allowing individuals to view all their pension information in a single place. 2023

Stronger Regulation

Who is impacted by the new Regulations?

DB Scheme sponsors, their wider groups (including individual directors and advisers) and trustees of schemes impacted by relevant corporate activity.

Examples of relevant activities may include events from the sale of a group company or part of its business through to payment of material dividends, special dividends or share buybacks.

What are the new penalties and requirements?

A snapshot is below :

  1. Wider financial sanctions - more circumstances where TPR can impose financial sanctions (e.g. a ‘contribution notice’) on a party
  2. New criminal offences - avoidance of employer debt and conduct which risks member benefits can attract an unlimited monetary penalty fine and/or 7 years’ imprisonment
  3. Increased reporting requirements in the form of more notifiable events and declarations of intent
  4. Strengthened regulatory powers - greater information gathering powers and new civil fines of up to £1 million.

How do I prepare?

To avoid scrutiny and sanctions, company directors and trustees need to demonstrate that they have taken the right steps and advice in a timely manner. A robust governance framework will be key to mitigate the risks.

PwC’s Pensions Risk Management Tool

PwC has created a digital platform to help corporates understand the impact their pension scheme might have on their business and to stay on the right side of compliance. It is designed to:

  • Help employers identify potential areas of corporate activity where pensions will need to be considered
  • Support businesses to navigate internal and external stakeholder engagement
  • Create a clear audit trail for all relevant decision-making and ensure an efficient use of management time when it comes to pensions decisions
  • Provide real time updates on regulatory developments as employers consider the pensions impact of corporate activity

Want to know more?

You should contact your usual PwC adviser or the contacts below to discuss your circumstances and potential implications.

Defined benefit scheme funding

What did the Act introduce for funding?

  • Scheme trustees are now required to produce a long term funding and investment strategy specifying which investments the trustees intend to hold and the long term funding target for the scheme. This strategy will need to be agreed this with the sponsor
  • A new regulatory Code of Practice on scheme funding will enter its second stage of consultation in the second half of 2021. This will introduce a twin track approach to regulatory compliance. A prescribed ‘Fast Track’ route to give schemes a simple and streamlined way of complying with the funding regime or a ‘Bespoke’ route for schemes that do not wish to (or can not) comply with the requirement of the ‘Fast Track’.

See the following links for more information:

Climate change reporting and governance

What did the Act introduce?

To support the government’s commitment to achieve a net zero economy by 2050, the Act also introduces a number of requirements for in scope schemes in respect of climate change:

  • Reviewing the exposure of the scheme to such risks;
  • Developing a strategy for managing the risks;
  • Measuring performance against those targets;
  • Publishing certain information relating to the effects of climate change.

Which schemes are in scope of these governance and disclosure requirements?

A pension scheme will be inscope if it has relevant assets of over £1 billion or it is an authorised master trust.

More details on the requirements and wider context and approaches.

Pensions dashboards

What are pensions dashboards?

A new platform which allows individuals to aid their retirement planning by viewing all their pension information in a single place including state pensions. The Money and Pensions service will operate a dashboard but commercial providers will also be able to operate a dashboard as well.

We have advised the Pensions Dashboard Programme on the data requirements and standards - you can download our report on the PDP website.

How will this affect my pension scheme?

Trustee and pensions providers will be required to provide certain specified information to the dashboards. Our practical guide to the Pensions Dashboard.

Broader pensions issues

  • Collective defined contribution schemes – an alternative pension design to traditional defined benefit and defined contributions schemes. These arrangements are common in some countries e.g. the Netherlands.
  • Members leaving pension schemes – The Act introduces additional restrictions on members leaving the pension scheme to help protect against scams.
  • Administration charges – the definition of administration charges has been widened as the DWP received questions asking for clarification on the definition.

Contact us

Alison Fleming

Alison Fleming

Partner, PwC United Kingdom

Tel: +44 (0)7843 327722

Oliver Reece

Oliver Reece

Partner, PwC United Kingdom

Tel: +44 (0)7920 847211

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