So the Queen’s Speech has been held, and a pension schemes bill (if not a pensions bill) is, as expected, included in the government’s legislative programme. 

 

Pensions were dealt with briefly in the speech. The Queen read: "To help people plan for the future, measures will be brought forward to provide simpler oversight of pensions savings. To protect people’s savings for later life, new laws will provide greater powers to tackle irresponsible management of private pension schemes.” 

 

The planned bill therefore confirms predictions that the Pensions Regulator will get stronger powers as proposed in the DB white paper, including fines of up to £1m and jail sentences of up to seven years. 

 

As well as handing more powers to the regulator, the bill will create a framework for collective defined contribution schemes and the pension dashboards. The new law will force pension schemes to feed data to the dashboards to obtain maximum coverage, overseen by the regulator. 

 

The bill will, in addition, create regulations to protect members from scammers, setting out circumstances under which a member will have the right to transfer their pension to another scheme. 

 

Last but not least, it will require a statement from trustees on their funding strategy and amend the legislation for the Pension Protection Fund compensation regime. 

Work and pensions secretary Thérèse Coffey said: “This Pension Schemes Bill is the next crucial step in making the UK the best place in the world to retire.” 

  

She called the changes “revolutionary”, adding: “With this legislation, we’ll ensure reckless bosses are brought to book, transform the way people get information about their retirement savings and introduce a whole new pension to the market boosting returns for millions.” 

 

The chief executive of the Pensions Regulator, Charles Counsell, welcomed the measures announced in the bill, which still needs MPs’ approval. 

 

"The Bill would give us the power to set and enforce clearer scheme funding standards in Defined Benefit 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,” he said. 

  

“We also welcome the innovation of Collective Defined Contribution if this can provide better outcomes for savers and employers without increasing risk,” Counsell added, noting that TPR is working with government on the regulatory regime, and is supportive of new powers to protect individuals’ pension savings and the pensions dashboards. 

 

 

The laws on CDC, dashboards and TPR powers will generally be welcomed in the industry, but the bill does not feature commercial DB consolidators – so-called superfunds. mallowstreet reported in early July that superfunds will not feature in the bill after shadow pensions minister Jack Dromey, who helped draft the legislation, revealed as much at an event by the Association of Member Nominated Trustees.  

 

The absence of specific laws around superfunds does not make them illegal – they are defined benefit schemes and can operate as such – and the Pensions Regulator gave guidance on what it expects from DB consolidators last December.  

 

However, it will be more difficult for TPR to handle this new form of fund without clear instructions. Former pensions minister Steve Webb tweeted that not having a bespoke regulatory framework for DB superfunds “risks regulatory limbo”. 

 

The lack of superfund regulation will also make sponsors part with their schemes less readily if these vehicles don’t have the explicit ‘blessing’ of the government – the reputational risk for a company is high were it to hand its scheme to a fund that many would consider under-regulated. 

 

The bill could lead to heated debates in parliament, which still has to approve it. Chair of the Work and Pensions Committee Frank Field has already put his stake in the ground, saying that under-regulation puts pensions at risk. 

 

Pensions minister Guy Opperman responded in September that the government still wants to progress a new regulatory regime for superfunds and that “TPR and I are very clear that we need to act”; he said he hopes to publish a response to an earlier government consultation on DB consolidation before Christmas. 

 

 

The government’s silence on when and how exactly to move forward with auto-enrolment is perhaps not surprising but will irritate some. 

 

Matthew Arends, head of UK retirement policy at consulting firm Aon, said: “There is no mention of automatic enrolment, so employers will need to focus on ensuring their employees are getting the most out of pensions in the absence of further rises in the minimum contribution rates.  And the self-employed continue to remain outside of [auto-enrolment].” 

 

Tax issues around pensions are arguably a matter for the Treasury, and so many hope to see this area of pensions come up in the next Budget. 

 

“There are other pressing pension priorities which need urgent government attention and we hope some may feature in the planned Budget on 6 November,” said Aegon’s Cameron. These include ensuring non-taxpayers in ‘net pay’ schemes receive the 20% tax relief on their pension contributions to which they are entitled. “The lowest earners deserve every help they can get to save for their retirement.” 

 

The government is also still at loggerheads with doctors over pensions taxation for high earners with defined benefit entitlements. The government has proposed what it considers a solution but this would further complicate an already overly complex system, and has already been rejected by the British Medical Association. 

  

“Issues with highly paid health professionals in the NHS scheme have shone a light on the sheer complexity of rules around pension lifetime and annual allowances,” noted Cameron. 

 

 

Not everything in the government’s legislative programme for pensions is immediately clear, such as the reference to “improving advice” for pension savers. 

 

The ‘improvement’ could be anything from compulsory guidance as suggested by Cameron, or a midlife MOT, to the pension dashboards. The latter will provide information, not advice, but the 'improved advice' forms part of a list of three with the other two being CDC and TPR powers. 

 

The reference to regulating DB transfers is equally vague. Malcolm McLean, senior consultant at Barnett Waddingham, said: "I am not clear what the reference implying a possibility of a restriction on certain DB transfers actually means, but I would be surprised if it were to be anything substantially different to that applying at the moment.” 

Social care, on which a green paper is long overdue, will be consulted on the government promised, as it plans to make proposals to address the current crisis.
 

"As ever the devil on this will be in the detail," said McLean. "Successive governments have all indicated a desire to fix social care but none has yet succeeded in doing so."

 

 

Ian Neale

Malcolm McLean

Steven Cameron

Gregg McClymont

Darren Philp

Matthew Arends