Yesterday (11 February) the most significant piece of pension legislation in over a decade, according to employment lawyers, finally hit the statute books.
Changes means that the Pensions Regulator (TPR) will now have the power to issue civil penalties of up to £1 million, as well as seven-year sentences for those who take advantage of people's savings.
HR will have to ensure that pension schemes are properly regulated within their business to avoid fines or legal action.
Claire Carey, partner at Sackers, said that the Pension Schemes Act 2021 will encourage employers to think longer term by introducing a new funding and investment strategy.
She said: “Whilst the bulk of the Act is largely unchanged from the Bill introduced into parliament over a year ago, there were some interesting skirmishes during its passage through parliament.
“The breadth of two of the new criminal sanctions were, for a time, a particular battle ground, having the potential to capture ordinary business activity as well as a wide spectrum of people.”
Under the Act workers will now be better protected against firms that misuse their money.
A new pensions dashboards will create a single digital platform to more easily access and review pension pots.
Savers will be able to see how much they can expect each month in retirement, and find out how they can improve their retirement prospects.
Matt Jenkin, partner and head of employment law at Moorcrofts, told HR magazine: “These changes were introduced to try and prevent some of the recent pension scandals such as the problems with the BHS pension scheme when the retailer was sold by Phillip Green.
“With fines of up to £1 million and prison sentences of up to seven years for some offences, employers with defined benefit schemes will have to ensure that proper processes are in place to ensure that these new requirements are complied with.”
TPR already has a broad range of anti-avoidance and enforcement powers to help it regulate occupational pension schemes.
However Graeme Riddoch, head of proposition at pension software provider Mantle, said that this Act is probably one of the most important since 2004.
“It touches all types of schemes and impacts on trustees, employers, members, regulators and service providers and administrators,” he said.
“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."
The Act also legislates for the creation of a new style of pension scheme - Collective Defined Contributions (CDCs), which have been developed in cooperation with trade unions.
This is where savers can pool their money into a single fund to share investment and longevity risk.