The government’s paralysis due to Brexit has meant that the to-do list was getting a little out of hand. Pensions and financial inclusion minister Guy Opperman noted at the release of the pensions bill that he grew some grey hairs during its creation.
We should perhaps set aside the political waters that this weighty bill is being cast into and whether or not it struggles against the tide for a while; as much of what is included will come into force.
The big-ticket items, the launch of Collective Defined Contribution (CDC) and pensions dashboards, are front and centre and both deal with the potential future of pensions. CDC is the hope that some kind of risk-sharing between sponsors and scheme members can return to pensions, while the pensions dashboards are aimed at giving savers aggregated information to plan for their retirements. We shall in time see how CDC gets on, but the pensions dashboards are something that all pension schemes will have to contend with one way or the other.
The Pensions Regulator is being given stronger weapons to intervene, mainly with failing sponsors to ensure they stand by their pension promises. We may dub this new law the Frank Field law as it is the power he wants to see used, as recent stories of some sponsors struggling with their pension deficits have shown.
We also know more about the fines for poor behaviour with pension schemes. There will be a fine of up to £1 million or imprisonment for up to seven years for depriving a pension scheme of funds or misleading the Regulator and the trustees.
What is clear is that the Regulator’s focus is on sponsors. However, trustees also have a new requirement: to prepare a statement for the Regulator’s eyes only on their future funding and investment plans.
This weighty tome of a bill appears to be a decent attempt to deal with some major pensions issues.
If the bill had included a move to expand auto-enrolment rules to cover the younger and lower paid too it would be a fairly impressive document. What needs to be digested is the extent to which the Pensions Regulator’s new powers are purely deterrent and whether they can actually be used in anger against individuals and sponsors. Only time, and some juicy court cases, will tell.
David Brooks is technical director at Broadstone Corporate Benefits