A pension schemes bill is set to be laid in parliament in the coming weeks after the government announced a wide-ranging suite of reforms in the Queen’s Speech today.
The much-anticipated legislation includes plans to extend the powers of The Pensions Regulator (TPR) and introduce regulations for the pensions dashboard.
Much of the content has been well-trailed and is derived from the government's defined benefit (DB) white paper, published last March, and a raft of consultations over the past two years.
Announcing the government's plans in the House of Lords, the Queen said: "To help people plan for the future, measures will be brought forward to provide simpler oversight of pension savings. To protect people's savings for later life, new laws will provide greater powers to tackle irresponsible management of private pension schemes."
Pensions and financial inclusion minister Guy Opperman earlier this month also said the bill was "completely ready to go", comprising "45-50 clauses" for CDC and "progressing with compulsion" for the pension dashboards.
A briefing document on the policy agenda confirms the government will provide "more options for employers to support their employees, saving collectively and sharing investment and mortality risk".
Royal Mail, which is set to launch the UK's first CDC scheme, welcomed the commitment: "The announcement of the bill puts us one step closer towards making CDC a reality for Royal Mail and its people. We have worked closely and jointly with the Communication Workers Union at all levels on this important issue and will continue to do so."
The government also said TPR's powers would be enhanced so it can "respond earlier when employers do not take their pension responsibilities seriously", including new criminal offences punishable by up to seven years in prison and/or £1m fines.
The watchdog will also gain the power to "obtain the right information about a scheme and its sponsoring employer in a timely manner, ensuring it is able to gain redress for pension schemes and members when things go wrong".
On the dashboard, TPR will gain powers to "compel pension schemes to provide accurate information to consumers".
TPR chief executive Charles Counsell said the bill would allow the watchdog to "continue in our commitment to be a clearer, quicker and tougher regulator".
He added: "The bill would give us the power to set and enforce clearer scheme funding standards in DB pension schemes while also providing early warning of potential problems.
"Where problems do arise, new criminal sanctions and civil fines will act as a strong deterrent against risky and reckless behaviour, giving us flexibility to issue fines at the appropriate level, depending on severity."
The bill will also contain additional areas on limiting the circumstances in which pension scheme members have the right to transfer out of their pension scheme, and amending the Pension Protection Fund compensation regime to ensure it continues "as intended" while changing the definition of administration charges.
‘Pensions lite bill'
Many praised plans to compel the provision of data to the dashboard, although some said more details were needed.
Hargreaves Lansdown head of pensions policy Tom McPhail said: "The key to making it work is to force all pension providers to open up their data, which this legislation will now do. Delivery of the dashboards may still be a few years away but, in the end, it will help with planning and cut down on lost pension pots."
However, the bill was missing at least one key area of expected regulation, DB consolidation, with the government understood to be continuing discussions with the consolidators and regulators over solvency rules.
Pensions Management Institute president Lesley Carline said, without this policy area, the legislation was a "pensions lite bill" and "a major disappointment".
She added: "With so much time being taken up by preparations for Brexit alongside some major reviews within the DWP, it is difficult to believe that there will be enough detail in the bill and, as happened before, backfilling will take place, causing confusion and complexity."
Royal London director of policy and former pensions minister Sir Steve Webb agreed, noting that there was also "no vision" for auto-enrolment (AE) reforms.
"The bill is notable more for the things that have been left out than for what it contains," he said. "The absence of vital measures on AE and on regulating new ‘superfunds' is a sign of a battle inside government where the Treasury has once again defeated the DWP.
"As a result, the vital expansion of AE is now on hold, and the regulation of pension superfunds has been left in regulatory limbo. It is one of the biggest failings of UK pension policy that the department with lead responsibility for pensions can be thwarted in bring forward sensible reforms by an over-mighty Treasury which has no vision for pensions."
The bill could, however, be delayed if a general election is held and its future relying on the Conservatives retaining power. With no government majority, there is also a possibility that MPs reject the Queen's Speech, derailing the legislation once more.
The government announced the policy agenda shortly after confirming chancellor Sajid Javid will hold his first Budget on 6 November if a Brexit deal has been agreed, or a few weeks after if not.
Ten master trusts will pay at least 25% of the total general levy despite holding just 2% of assets, according to The People’s Pension (TPP).
Partner Insight: Member engagement with pension schemes is increasing, giving administrators ever more interactions to deal with. In this article, Aon looks at the increase in requests relating to scheme transfers.
The government should give the regulator more powers to prevent companies from avoiding defined benefit (DB) deficits, according to a Pensions Institute report.
More than two thirds of pension professionals have said the Pension Protection Fund (PPF) and the Pensions Regulator (TPR) should be combined, according to a survey.
The debate over whether schemes should be able to change statutory pension increases from RPI to CPI continues with calls for a statutory override to be put in place. Kristian Brunt-Seymour considers its feasibility