The Pensions Act 2008 (the Act) received Royal Assent on 26 November 2008, almost a year after it was first introduced to Parliament as the Pensions Bill 2007.
The main provisions of the Act are summarised below:
- Extension to the powers of TPR. There will be a new basis on which TPR will be able to issue a contribution notice. Section 38 of the Pensions Act 2004 will be amended to enable TPR to issue a contribution notice if an act or failure to act is “materially detrimental” to the likely provision of members’ benefits under the scheme. The Government has agreed to a four-year review of the operation of TPR’s new powers. For further detail, see our October 2008 update.
- Widening of TPR’s power under section 7(3) of the Pensions Act 1995 to appoint independent trustees to occupational pension schemes, so that TPR may appoint a trustee if it considers it “reasonable” to do so, rather than “necessary”, as currently.
- Amendment of TPR’s powers in relation to the implementation of the scheme-specific funding regime. TPR will have the power to intervene in a scheme funding process where it is of the opinion that the trustees’ approach to assessing the scheme’s technical provisions is not sufficiently prudent.
PPF and Financial Assistance Scheme
- Changes to technical provisions relating to the PPF and to the Financial Assistance Scheme (FAS). The temporary ban on annuity purchase by trustees intending to seek FAS assistance will be made permanent. This will enable any PPF compensation to be shared between a member and an ex-spouse following divorce.
Revaluation of deferred pensions
- As noted above, the cap on the revaluation of deferred benefits will be reduced from 5 per cent to 2.5 per cent. It is expected that this change will come into force on 6 April 2009 and will affect benefits accrued after that date.
- All employers will be required to enrol “jobholders” who are aged at least 22 and who earn “qualifying earnings” into an “automatic enrolment scheme”. There will be a statutory right for employees to opt out.
- The employer will make minimum contributions of at least 3 per cent of the employee’s “qualifying earnings” (i.e. between £5,035 and £33,540) and the minimum employee contribution will be 5 per cent gross (including tax relief). Contributions will be phased in from 2012 over 3 years.
- There will be an annual self-certification process for employers with an existing final salary or money purchase scheme which satisfies the quality test for pension provision.
- The statutory requirement under the Welfare Reform and Pensions Act 1999 for employers to designate a stakeholder pension scheme will be revoked.