More than 270 amendments to the Pension Schemes Bill have been put forward for consideration by a parliamentary committee. Pensions Expert looks at some of the most significant proposals.
On the first day back for MPs after the summer recess, the UK parliament’s website published more than 200 amendments to the Pension Schemes Bill ahead of the start of the committee scrutiny stage of its journey through parliament. By the middle of this week, this list had grown to more than 270.
Industry representatives from trade bodies, pension providers, and other organisations this week gave evidence to the scrutinising committee on its various aspects, from surplus release to investment mandation, Local Government Pension Scheme pooling to small pots, and value for money to defined contribution consolidation.
Pensions minister Torsten Bell has put forward the majority of amendments, most of which relate to administrative changes, edits, and corrections. However, there are several additions that bring in new considerations for the pensions industry.
During the committee meeting on 2 September, Bell was criticised by Kirsty Blackman, the Scottish National Party’s spokesperson for work and pensions, for giving committee members less than 48 hours to review “an awful lot of amendments”. Bell said he wanted to make sure amendments were seen by the committee, which will review the bill “line by line”, rather than bring them in later in the process.
Meanwhile, Liberal Democrat, Conservative, and Plaid Cymru MPs have proposed several additional new parts of the bill, including provision of universal free pension advice.
Pensions Expert outlines some of the most significant proposed amendments that MPs will consider over the next few weeks. Click the headline to find out more about each story.
Govt seeks to mitigate Virgin Media ruling impact with bill additions
The government has tabled several amendments to the Pension Schemes Bill aimed at addressing issues around the so-called “Virgin Media issue”, relating to historical changes made to schemes contracted out of the state second pension. Trade bodies, including the representative groups for actuaries and pension lawyers, have been lobbying the Department for Work and Pensions for months in relation to the issue, which relates to the interpretation of section 37 of the Pension Schemes Act 1993.
Scottish LGPS funds to be included in new pooling regulations
Torsten Bell has proposed changes to the draft legislation removing specific references to the LGPS in England and Wales, and changing references to the secretary of state to “responsible authority”. These are explicitly aimed at ensuring the first clause of the bill – which relates to pooling arrangements – covers the LGPS in England, Wales and Scotland.
Lib Dems call for ‘universal advice’ in Pension Schemes Bill
Liberal Democrat MPs have called for the government to legislate for universal free pension advice in an amendment to the Pension Schemes Bill. Steve Darling, a member of the Work and Pensions Committee, tabled an amendment that would introduce a “universal pension advice entitlement”, which would include a legal requirement for “every individual” to receive “free, impartial pension advice” at age 40 and again five years before their retirement date.
Bringing DB pension funds into the value for money regime
Another Lib Dem-backed amendment would bring defined benefit pension schemes into the scope of the proposed ‘value for money’ (VfM) regime.
Currently, this is being designed by the Financial Conduct Authority (FCA) with input from the Pensions Regulator (TPR), and is aimed solely at auto-enrolment defined contribution pension schemes.
However, an amendment to the Pension Schemes Bill put forward by Darling and supported by fellow Lib Dem MPs John Milne and Liz Jarvis would bring DB schemes into the regime too.
It states: “Value for money regulations may make different provision for different descriptions of relevant pension schemes and must make provision for the application of the value for money assessment with a VfM rating to defined benefit occupational pension schemes.”
The MPs have also proposed removing a reference to DC schemes to “ensure that the value for money provisions introduced by this bill apply to all occupational pension schemes”.
Restricting new default arrangements as government targets scale
Regulators will be given powers to restrict the creation of new default arrangements under a proposed addition to the Pension Schemes Bill put forward by the pensions minister.
The amendment sets out powers for the Financial Conduct Authority (FCA) and the Pensions Regulator (TPR) to refuse to permit a pension provider to launch a new default scheme in certain circumstances.
The government has set a target of £25bn as a minimum size for default pension fund arrangements used for auto-enrolment. This is designed to increase pension schemes’ ability to invest in a diverse range of assets, as well as enhancing governance arrangements.
The proposal is primary legislation, so it does not provide exhaustive details of how the regulators will assess whether or not they will approve a new default arrangement. However, it outlines potential rules governing the consolidation of sub-scale default arrangements to be enforced by either the FCA or TPR.
The proposal also includes a requirement for the secretary of state to conduct a review of default arrangements in conjunction with the Treasury. This review will consider default arrangements that do not meet the £25bn scale requirement and their operators’ plans to consolidate or otherwise meet this target.
A government-backed impact investment fund?
Another Lib Dem-supported amendment to the Pension Schemes Bill involves a call for state-backed impact investment funds.
The new clause refers to “targeted investment vehicles” that would be designed specifically for pension schemes.
Such funds would invest in areas that would provide “social or economic benefit”, the clause states. It gives specific examples of “projects that revitalise high street areas”, “initiatives demonstrating social benefit”, and affordable housing and social housing investments.
Lib Dems table trustee independence amendment
A separate amendment proposes a change to the Pensions Act 1995, which sets out requirements about who can and cannot be a pension scheme trustee.
The Liberal Democrats have called for an additional factor that would disqualify from being a trustee anyone who “has a personal or financial interest in the pension scheme”.
Steve Darling’s explanatory statement for the amendment explained that the clause was designed to ensure that “pension scheme trustees [are] truly independent of the sponsoring companies so that they can protect scheme members’ interests without any conflict of interest”. However, it is unclear as to how this amendment would interact with rules allowing member-nominated trustees.
A separate amendment put forward by Torsten Bell, the pensions minister, proposes the creation of a value for money database to collate data from trust-based and contract-based pension schemes.
Darling has also put forward a new clause that would require the government to “report on the impact of market consolidation on competition and new market entrants” within 12 months of the Pension Schemes Bill becoming law.
