The Pensions Schemes Bill implements a new framework for categorizing of private pensions based on the type of "promise" that the scheme offers. The aim is to encourage greater risk sharing between employers, members and third parties, via "shared risk" schemes (also known as defined ambition schemes) and "collective benefits".
The Bill is also one of the two key pieces of legislation which will implement the Budget 2014 changes. Key developments in this context are:
- new provisions have now been inserted relating to the guidance guarantee; and
- further amendments have recently been tabled by the Government, including:
- provision for an additional "safeguard" where members either wish to transfer or convert DB benefits to DC benefits in order to access the new flexibilities. Trustees will need to take reasonable steps to check that members receive "independent financial advice" (still to be defined in secondary legislation); and
- extend the right which certain members (those with uncrystallized DC benefits) currently have under legislation totransfer benefits, up to and beyond normal retirement age (currently the statutory right to transfer only applies if a member is more than 1 year from normal retirement age). DB benefits would not be affected by the extended right to transfer.