The Pensions Bill 2011 has had its first reading, having been introduced into the House of Lords on 12 January 2011.

The Bill largely deals with amendments to the Pensions Act 2008 in relation to the operation of auto-enrolment, such as imposing a duty on an employer automatically to enrol a jobholder where it causes the jobholder to cease being a member of a qualifying scheme and arrange for him to become an active member of an alternative qualifying scheme.

In addition to this, the Bill also addressed other anticipated changes to existing legislation, in particular:

  • some (limited) changes to indexation;
  • changes to the time limits for the Pensions Regulator (TPR) to exercise its moral hazard powers; and
  • amending section 251 of the Pensions Act 2004.

There are a number of provisions relating to the switch from the retail prices index (RPI) to the consumer prices index (CPI) (see our previous bulletin) as the basis for minimum pensions increases and importantly, confirms that where the scheme rules specify the use of RPI for calculating the increases, no CPI underpin will apply.

Concerning the time limits for TPR to exercise its powers under the Pensions Act 2004, the Pensions Bill proposes to extend the current two-year time limit. Under the present legislation, an FSD can only be issued based on the financial test at a date no earlier than two years from the date its determinations panel makes a ruling. This two-year period includes obtaining a final determination from the panel. However, the change in legislation will allow TPR to choose a date for the financial test which is within two years of the issue of a warning notice. This leaves it free to continue the process to the determinations panel at a later date.

The Bill proposes to amend section 251 of the Pensions Act 2004 (payments of surplus to employers) and proposes to:

  1. extend the time limit for passing a resolution under the section; and
  2. clarify that the provisions relate solely to payments falling within the requirements of section 37 of the 1995 Act (this section outlines the requirements that must be complied with for any future repayments of surplus).

The Pensions Bill will now receive its second reading in the House of Lords, during which the contents of the Bill will be debated, on a date to be announced.

Please click on the following link to view the Bill and explanatory notes online.