TPR pledges guidance after royal assent for Pension Schemes Act

Counsell argued that through the new act, the regulator will build on its “clear, quick and tough approach to drive better standards across the pension schemes we regulate and ensure savers are treated fairly by employers”.

The legislation gives the regulator extensive new powers to act against employers and to gather information, which Counsell likewise welcomed, saying it gives TPR the power “to scrutinise how defined benefit pension schemes are funded and the actions that affect them”.

These measures have been the subject of intense scrutiny and no small amount of criticism, however. In January, LCP warned that the expanded powers and definitions could see all manner of people deemed criminally liable for what would usually have been deemed ordinary business activity.

Under the new act, trustees could face a £1m fine or even a custodial sentence if it is deemed their actions — or inaction — materially reduced the likelihood of members getting their benefits in full.

Corporate restructures that move assets away from a pension scheme could also be penalised, as could lenders requesting extra security when lending to struggling companies with DB schemes.

In a Pensions Expert podcast, Arc Pensions law partner Jane Kola and Society of Pension Professionals president James Riley warned the implications could be so vast and damaging that the act could cause a raft of unnecessary bankruptcies by restricting actions necessary for the survival of businesses. They called on the regulator to issue guidance as a matter of urgency.

Laura McLaren, partner at Hymans Robertson, likewise said that, though welcome, the act gaining royal assent is only the “first step”, and “much of the underlying detail is left to secondary regulations and guidance that will now need to be drafted, consulted on and implemented over the coming months”.

“The regulator has already announced a second consultation for later this year on the new DB funding code of practice, with the new rules almost certainly not coming into operation until into 2022,” she continued.  

“Engagement and consultation is also expected on the provisions around corporate activity and how the regulator will exercise its expanded arsenal of powers, with these expected to be in play by autumn of this year.”

Responding to the act’s royal assent, Counsell said that TPR will “be clear in our expectations when talking to trustees, employers and others, and quick to take effective action where we have concerns”.

“We will continue to work closely with the industry and other stakeholders to produce the necessary codes and guidance to ensure the measures are introduced in an effective way,” he said.

“We are a risk-based and proportionate regulator and this measured approach will continue. Our work is driven and directed by the pursuit of our statutory objectives, and we use our powers where appropriate and reasonable to do so.”

The act also compels trustees to demonstrate how their funding approaches are “prudent, appropriate and sustainable”, Counsell said.

“Pension scheme trustees should be considering the effects of climate change, and we can expect regulations requiring them to engage more fully with the risks and opportunities arising from the response to this global emergency.”

TPR will be launching its own climate strategy later this year.