A pension schemes bill has been included in the Queen’s Speech as expected, but critics say the government’s Brexit headaches and lack of majority mean it is little more than a manifesto pledge.
The bill will aim to enable the creation of collective defined contribution schemes, force compliance with data requirements for the pensions dashboard, and give the Pensions Regulator new powers to protect defined benefit members.
“To help people plan for the future, measures will be brought forward to provide simpler oversight of pensions savings,” Queen Elizabeth said.
“To protect savings for later life, new laws will provide greater powers to tackle irresponsible management of private pension schemes.”
Key features of the pensions bill
Providing a framework for the establishment, operation and regulation of collective money purchase schemes (commonly known as CDC pensions).
Strengthening the Pensions Regulator’s powers and the existing sanctions regime. This will include introducing new criminal offences, with the most serious carrying a maximum sentence of seven years’ imprisonment and a civil penalty of up to £1m.
Giving the regulator powers to obtain the right information about a scheme and its sponsoring employer in a timely manner, ensuring that it is able to gain redress for pension schemes and members when things go wrong.
Providing a framework to support pensions dashboards, including new powers to compel pension schemes to provide accurate information to consumers. This will include provisions for the regulators to ensure relevant schemes comply.
Creating regulations to set out circumstances under which a pension scheme member will have the right to transfer their pension savings to another scheme.
Improving the DB scheme funding system by requiring a statement from trustees on their funding strategy.
Amending the legislation for the Pension Protection Fund compensation regime to enable the fund to continue to apply the compensation regime as intended and amend the definition of administration charges.
As previously indicated in the government's white paper on defined benefit, the bill will seek to provide a maximum criminal sanction of seven years in prison for wilful or reckless negligence by DB bosses, while a civil penalty of up to £1m will also be brought forward. As predicted by several commentators, the government looks to have abandoned its intention to ease the creation and regulation of DB commercial consolidators.
DB trustees will be required to compile a statement on their approach to scheme funding, while legislation governing the Pension Protection Fund would be amended to "enable the fund to continue to apply the compensation regime as intended and amend the definition of administration charges".
Brexit risk to bill passing
Many of the new laws proposed by the pensions bill will not be contentious. Indeed, pensions and financial inclusion minister Guy Opperman and Labour shadow pensions minister Jack Dromey have adopted a collaborative approach in the run-up to its publication.
However, politicians also note that the entire contents of Monday’s speech could be derailed by developments relating to Brexit and the likelihood of an election. Prime Minister Boris Johnson has stated a desire for an election before Brexit, while Labour leader Jeremy Corbyn wants to secure an extension to the Brexit deadline before whipping for this outcome.
There is the question of whether we will actually ever see the bill because of Brexit and political uncertainty
Tim Smith, Herbert Smith Freehill
MPs will debate the Queen’s Speech and vote on its contents on Monday evening, leading to the possibility that the pension measures fall down before they are even debated independently of the wider package of laws.
Joanna Cherry, Scottish National Party MP for Edinburgh South West, told BBC News: “I’ll tell you one thing that I welcomed; the idea that there should be consequences for those who irresponsibly manage private pension funds. I think we could all get behind that.”
She said she would have liked to see proposals for women affected by changes in the state pension age, but that given the likelihood of an election before bills are passed the contents of the speech were merely political grandstanding: “It’s a list of things they think will win them votes in England.”
Sir Ed Davey, deputy leader of the Liberal Democrats and MP for Kingston and Surbiton, agreed. “I’ve never known a Queen’s Speech that is less likely to be enacted. We all know that this is just behind the backdrop of Brexit... the key issue is whether Brexit will be implemented,” he told the BBC.
Select measures will survive
While the bill itself may not be given enough parliamentary time to pass, some measures that do not strictly require legislation may yet remain. TPR is understood to be ready to publish a consultation on its new DB funding approach, which would not require primary legislation to enact.
“Obviously, there is the question of whether we will actually ever see the bill because of Brexit and political uncertainty,” said Tim Smith, professional support lawyer at Herbert Smith Freehills.
However, he added: There’s likely to be broad support for the new powers for the regulator, and obviously the code of practice could be introduced independent of any changes [in law].”
Field sounds alarm over unregulated DB superfunds
The chair of the Work and Pensions Committee has warned that the government may be putting retirements at risk if it does not bring forward legislation to regulate defined benefit superfunds.
Mr Smith noted the omission of any mention of DB ‘superfund’ consolidators. While the watchdog has expressed a desire for specific regulation of this sector, their status as pension schemes means the consolidators can begin accepting schemes under the current framework. This prompted select committee chair Frank Field to raise concerns about lack of member protection last week.
“It puts the regulator in a difficult position. But the reality is though that the transactions could go ahead anyway, and strictly speaking clearance isn’t required, it’s only voluntary,” Mr Smith said.
“The more difficult question will be whether the trustees of the relevant schemes could get comfortable in the absence of regulation.”
