Members of the House of Lords will debate a number of key amendments to the Pension Schemes Bill this week.
The Bill has now reached the committee stage, with Parliament scheduling five days to scrutinise the various clauses of the Bill in detail, including the Bill’s ‘reserve’ powers that will allow government to mandate investment policies. The peer in the House of Lords will also consider a number of potential amendments to the Bill.
This includes a potential exemption to the DC scale tests for smaller schemes that can demonstrate they provide good value for money under the new VfM framework.
The House of Lords will also look at changes to ensure employers do not face restrictions when they receive surplus payment from a DB schemes. There will also be debate as to whether there should be a reduction to the superfund wind-up funding threshold, to avoid higher entry costs and potentially more investor risk.
The peers will also review the long-term cost and sustainability of the Local Government Pension Scheme, and how surplus funds in these schemes may be used.
A full debate on the key principles of the bill took place during second reading on Thursday 18 December.
The Pension Schemes Bill was introduced last year and contains a number of key reforms to the UK workplace pensions sector. These include:
- provisions to introduce the new Value for Money framework
- a new scale test for multi-employer schemes, creating so called ‘megafunds’
- reserve powers that could compel schemes to invest a proportion of assets in UK private markets and productive finance
- new requirements for DC schemes to offer ‘default’ retirement income options
- measures to allow for the automatic consolidation of small pension pots.
The Bill also contains a number of DB reforms, which include allow well-funded schemes to return surpluses to employers, subject to certain safeguards.
TPT Retirement Solutions head of policy and external affairs Ruari Grant says: “As the Pension Schemes Bill reaches committee stage in the House of Lords, it’s encouraging to see amendments that focus on proportionality and improving outcomes for savers.
“While much debate this week will naturally surround the asset allocation reserve power, we will be particularly interested to follow proposed amendments on scale and value for money, especially where exceptional value provided to members might offer a vital check on otherwise blunt scale tests for master trusts.
“Furthermore, amid much discussion on productive use of DB scheme surpluses, there are a number of amendments aiming to make the proposed regulation of superfunds more proportionate, such that they might become a realistic and secure end-game opportunity for more schemes, offering benefits to members, sponsors and the UK economy.”