Pension Schemes Act
Welcome to our Pension Schemes Act 2021 insight hub – the only place you need to look to find all you need to know about how the new law impacts you.
How will the new funding regime impact schemes, trustees and sponsors? How do the new Pensions Regulator powers constrain corporate activity? What action does my scheme need to take in response to climate change risk?
Our technical experts share their comments and insight here. See our short summary and more detailed guide for more information on the detail of the Act in January 2021. Developments since then are set out below.
The hub is divided into five sections covering key issues that are important for all schemes and sponsors to consider: funding, regulator powers, action on climate change, pensions dashboards and action on pension scams.
The publication of the DWP's Funding and Investment Strategy regulations on 29 January 2024 fired the starting gun for the new funding regime that is being introduced by the Act. Actuarial valuations with dates after 22 September 2024 will come under the new regime; valuations in the meantime will be influenced by the new requirements. Around June 2024 we expect a new Funding Code to be published that provides the detail. The new regime is expected to be the biggest revolution to the requirements for scheme funding and investment for 20 years.
The Pensions Regulator has been given extensive new powers under the Act. These include powers to impose Contribution Notices on companies or directors more easily – requiring them to make one-off and substantial contributions to pension schemes. They also include powers to send anyone to jail who acts in a way to increase the likelihood that pension benefits won’t be paid. This requires new governance approaches from companies and trustees to ensure “at risk” events are identified and appropriate action is taken.
The Act introduces a requirement for “prescribed” pension schemes to manage and report annually on their exposure to climate-related risks and opportunities. This currently applies to schemes with assets of £1bn or more and DWP wants it to drive better climate practices among schemes of all sizes. The requirements represent a step-change that requires significant action by affected schemes.
The Act provides a framework for pensions dashboards. The concept is great: everyone in the country will have access to a single online source for information about their personal pensions. However, the impact on pension providers could be challenging and costly. After all, someone is going to need to provide all that data. Pension schemes should keep track of the various consultations and developments and ensure they are well prepared for providing the required data by the relevant deadline.
Too many members of pension schemes have suffered at the hand of scammers. New regulations give trustees the power to stop suspicious transfers from 30 November 2021 by introducing a system of Red and Amber flags. Some of these tests are subjective and trustees should continue to proceed carefully to ensure they protect members whilst navigating some of the challenges of the regulations in a way that mitigates the risk of complaints. In June 2023, DWP announced they are reviewing the regulations, particularly in the areas of 'overseas investments' and 'incentives', with the potential for change to reduce the number of unnecessary red and amber flags... watch this space.
