The Pension Schemes Bill passed through Parliament today but may not come fully into effect until well into 2022, say industry experts.
The final Parliamentary stage of the Pension Schemes Bill was completed in the House of Lords this afternoon and it will shortly receive Royal Assent.
But consultants LCP argue that large sections of the Bill will not come into force for many months and that key provisions on pension scheme funding may not be implemented until well into 2022.
The key challenge for the government is that although an Act of Parliament gives it new powers, those powers often have to be fleshed out in detailed regulations. According to LCP, the Pension Schemes Act 2021 will need further regulations on collective money purchase (known as CDC) schemes, pensions dashboards, climate change governance, regulator powers on contribution notices, interviews and inspections, DB funding and restricting transfer out rights to tackle pension scams.
LCP argues DWP will not have the capacity to produce all of these regulations at the same time, and many of them will require Parliament to consider them.
And it expects TPR to undertaking its own further consultation on its new funding code once DWP has produced its regulations on Regulator powers.
TPR’s second consultation is not expected until the second half of 2021, and the new funding rules are therefore unlikely to apply to valuations due before Q2 2022.
LCP partner and head of research David Everett says: “Although this feels like the end of a long journey, in reality it is more like half-time. To put a new Act of Parliament into effect requires a large amount of secondary legislation, Codes of Practice and guidance and this needs time to be drafted, consulted on and implemented. We expect to see a phased implementation of the new Pension Schemes Act, with the scheme funding powers almost certainly not biting until well into 2022. There will be much for the pensions industry to do in terms of engaging with this process to make sure that everything is fit for purpose”.
Karina Brookes, leader of EY’s UK Pensions Strategy team says: “Pension scheme trustees have been at the corporate stakeholder table for some time now but this Bill reinforces the need that they should be at the forefront of the corporate mind.
“It has never been more important for corporates which sponsor UK defined benefit schemes and their pension scheme trustees to work together with openness and transparency if they are to achieve optimal outcomes for sponsor and pension members alike.
“It is essential that sponsoring corporates are on the front-foot when it comes to engaging their pension scheme trustees – in some cases, their largest creditor – around any intended major changes to the business including dividend policy, reorganisation, restructuring and transactions.”