The government has now published its proposals for reform in its long-awaited white paper.
The white paper delivers a clear message that the government believes the system is working well on the whole and there is no systemic problem in the framework of legislation and regulation.
However, in response to a number of recent high-profile cases, the government intends to strengthen certain areas. Here are the headline points.
Stronger powers for the Pensions Regulator
The government intends to:
- give the Regulator powers to fine those who deliberately put their pension scheme at risk
- introduce a criminal offence to punish wilful or grossly reckless behaviour in relation to a pension scheme
- build on the existing disqualification process of company directors
- strengthen the existing notifiable events framework and voluntary clearance regime.
There will be a revised Code of Practice focusing on:
- demonstrating prudence when assessing scheme liabilities
- the appropriateness of factors for recovery plans
- ensuring a long-term view is considered when setting the statutory funding objective.
New DB Chair’s Statement
Defined benefit schemes will be following the defined contribution regime with a new requirement for trustees to appoint a Chair. One of the new functions will be to report to the Regulator in the form of a Chair’s Statement, submitted with the triennial valuation.
A consultation to be issued later in the year will look at ways to encourage efficiencies and facilitate scheme consolidation, including the introduction of a new accreditation regime for consolidation vehicles.
Work in progress
The government is looking closely at the framework of Regulated Apportionment Arrangements but this remains work in progress.
Having listened to feedback from consultation, there will no new overriding power for employers to allow a switch from RPI to CPI.
Similarly, there will be no change to the rules for multi-employer statutory debt provisions.
We welcome the white paper’s recognition that a strong and solvent employer who is working with trustees to put its pension scheme on an equal footing with its other business considerations is that pension scheme’s best protection.
In our experience, this is how most employers operate anyway – but for those who don’t, we are encouraged that the Pensions Regulator will have new powers to allow it to act proactively so that we don’t see situations like Carillion occurring again.
Those new powers, plus the threat of punitive fines and criminal sanction, should pose a significant disincentive to those who may not be behaving responsibly in respect of their pensions obligations. We’re looking forward to engaging with these proposals as they develop.