Pensions Schemes Bill Update
In our January 2015 Update we provided an update on the passage of the Pension Schemes Bill 2014/2015 through Parliament. The Bill completed its passage through the House of Lords on 5 February. The amendments have been passed back to the House of Commons for consideration.
To recap briefly, the Pension Schemes Bill will, amongst other things, put in place the statutory framework under which members may transfer DB benefits to a DC scheme in order to take advantage of the Budget flexibilities. The legislation will also provide the statutory basis for the Government's new guidance service for members retiring with DC pensions.
Implementing the flexibilities - new regulations
The DWP published on 19 February three sets of amending regulations in connection with the introduction of the new pension flexibilities from 6 April 2015. In particular, the regulations (which remain subject to legal review and Parliamentary approval) address:
- the introduction of a statutory modification power under which scheme rules may, subject to employer consent, be modified to allow the scheme to provide for the additional options which will be available from 6 April 2015 (this power is separate to the overriding power contained in the Taxation of Pensions Act 2014 - see our August 2014 Update - which, strictly speaking, allows trustees to make certain benefit payments under the new flexibilities without amending the rules or requiring employer consent);
- revision of the current disclosure regime in view of the new flexibilities and the introduction of new requirements regarding the communication of members' options and the requirement to draw members' attention to the Government's pensions guidance service. The draft regulations can be viewed here.
FCA - requirement to draw attention to pensions guidance The FCA announced in January, in relation to contract-based schemes, that there should be a "second line of defence" to encourage members retiring with DC pensions under contract-based schemes to make the right decisions. The detail of that additional protection is still awaited but is likely to constitute a requirement on regulated pension providers to give customers appropriate risk warnings and draw their attention to the guidance available. This reflects the approach being taken to impose similar disclosure duties on trust-based schemes (see above).