To widespread support from the pensions industry, the Department for Work and Pensions (DWP) has set out in its white paper, Protecting Defined Benefit (DB) Pension Schemes, proposals to strengthen “the effectiveness and efficiency” of the “moral hazard” powers of the Pensions Regulator (TPR) and its wider policing of the DB arena.

Responding to the recent debacles at BHS and Carillion, DWP announced new powers for TPR and the strengthening of existing ones, while remaining careful not to cause “an adverse effect on legitimate business activity and the wider economy". DWP has emphasised its view that there is no systemic problem with the regulatory and legislative framework of DB schemes, but that improvements could and should be made.

The following announcements are the highlights of the white paper:

  • new powers for TPR to fine company bosses who deliberately put at risk their DB schemes and have them disqualified and criminally prosecuted where they “[commit] wilful or grossly reckless behaviour in relation to a pension scheme”;

  • an increase to TPR’s information gathering powers, to be "supported by penalties to drive co-operation", like obligatory attendance at interviews, civil sanctions for non-compliance with “section 72 notices” (under which TPR can demand documents and other information from trustees and employers) and inspection powers;

  • the strengthening of the contribution notice and financial support direction regimes;

  • a new consultation, on improving the existing corporate clearance framework, together with a review of the “notifiable events” framework, to ensure that it covers all relevant transactions and alerts TPR to potential risks earlier, and TPR's code on DB funding standards, focusing on prudence when assessing liabilities and ensuring that trustees maintain a long-term view when setting the funding objective.

  • a requirement on DB trustees to appoint a chairman, if no one has been appointed already, who will need to provide a chair's statement to TPR when submitting a scheme's triennial valuation.

The measures will be phased in up to the 2019/20 parliamentary session, when the necessary primary legislation is likely to be enacted. While the proposed changes represent the greatest review of TPR’s powers and role since its incarnation, we think that the impact will depend on nimble drafting of the legislation, the extent to which TPR’s resources are increased in line with its powers and, importantly, TPR’s appetite to invoke those powers.