Pension Schemes Bill ping pong
21st January, 2021
The Pension Schemes Bill is expected to receive Royal Assent imminently. A detailed guide to its provisions will follow. In the meantime, final amendments (the so-called ‘ping pong’ stage) were considered on Tuesday 20 January and some interesting points from the debate are summarised below.
Collective Defined Contribution (CDC) Schemes
According to the record of Parliamentary debate: “… we have intentionally avoided referencing [intergenerational] fairness … within any of the CDC provisions. Instead, following consultation, we intend to use these regulations to set out clear principles and processes that schemes must follow to ensure that different types of members are treated the same where appropriate—for example, when accruing and calculating benefits and making adjustments to benefits. These requirements will form part of the authorisation process for CDC schemes overseen by the Pensions Regulator.”.
On the introduction of dashboards from other providers, the Government “… will not allow any qualifying dashboard to be launched before that of the Money and Pensions Service. However, we remain firmly of the belief that allowing other properly regulated dashboard providers to operate is the best way to drive engagement, reaching out to consumers where they may already interact with digital services, and unlocking innovative potential.”.
An amendment that would have stopped dashboards from become transactional platforms without primary legislation was removed; in other words, transactional capability could be introduced through future regulations.
As a reminder, the FCA will regulate the provision of dashboard services and using the dashboard to see your own data will free.
Trustees must take the Paris Agreement and domestic climate change targets into account in their overall governance and their disclosure of climate change risks and opportunities.
This is the first time that the words “climate change” have featured in domestic pensions legislation.
The detail, in terms of what the new funding and investment strategy will need to include, will be set out in regulations.
In response to concerns around the funding regime continuing to be scheme-specific and taking into account schemes that are still ‘meaningfully open’, the Government stated that they have made a clear commitment “to ensuring that regulations work in a way that does not prevent appropriate open schemes investing in riskier investments where there are potentially higher returns, provided the risks taken can be supported and that members’ benefits and the Pension Protection Fund are effectively protected.”.
Some key principles of how the Government will proceed with framing the secondary legislation were also set out:
- “… the Government, having further considered the debate on the Bill and feedback from the pensions industry, fully intend that the defined benefit funding regime will remain scheme specific, and any bespoke approach should build on this foundation. This regime will continue to apply flexibility to take account of individual scheme circumstances”
- Both regulations the Pension Regulator’s defined benefit funding code of practice will acknowledge the position of open and less mature schemes.
- Prior to the publication of the draft regulations, there will be an engagement programme with interested parties – including a range of schemes. Impact assessments will include analyses of different de-risking approaches on members and sponsors of all schemes, including those that are open or immature, and those that are not targeting buyout.
According to the Government, “We absolutely do not want to see good and viable defined benefit schemes close unnecessarily”. Also, “The Government accept that for some schemes, depending on the circumstances, de-risking is not the best way to safeguard members’ benefits”.