On 15 October, the eagerly awaited Pension Schemes Bill (the Bill) had its first reading in the House of Lords. Whilst the Bill addresses the launch of collective defined contribution (or CDC) pension schemes and includes provisions enabling pensions dashboards, employers will be particularly impacted by the new requirement on trustees to produce a funding and investment strategy, to which employer agreement must be obtained. However, perhaps of more immediate concern to employers will be the increased powers that the Pensions Regulator (TPR) will be given under the Bill.
The powers that TPR will be given bring into effect the enhanced regulatory tools referred to in the Government’s 2018 consultation on strengthening TPR’s powers. In particular, new criminal offences will be introduced for the following:
- Failure to comply with a contribution notice – punishable by an unlimited fine.
- Avoidance of an employer debt under section 75 of the Pensions Act 1995 – punishable by an unlimited fine and/or a maximum of seven years in prison.
- Conduct which affects the likelihood of accrued scheme benefits being received (which will bring into effect the Government’s plans for “wilful or reckless behaviour” relating to pension schemes to become a criminal offence) – punishable by an unlimited fine and/or a maximum of seven years in prison.
The above punishments are all targeted at employers and in particular seem to be aimed at ensuring that failing sponsors stand behind their pension schemes. On a related note, it is worth noting that the Bill also introduces two new tests for imposing a contribution notice on employers – the “employer insolvency test” and the “employer resources test”.
The Bill also makes it clear that TPR will have the power to issue civil penalties of up to £1 million for any of the above offences, or to an employer that knowingly or recklessly provides TPR (or the trustees or managers of a scheme in certain situations) with false or misleading information.
Under the Bill, TPR will also be able to require employers to attend interviews in order to provide answers to questions and explanations on matters relevant to the exercise of TPR’s regulatory functions. Employers should also be aware that the reasons for which TPR’s inspectors can enter an employer’s premises will be extended to cover situations where TPR wishes to investigate whether it has grounds for issuing a contribution notice, financial support direction or restoration order.
The Bill seeks to impose fines of up to £1 million where misleading information is “knowingly or recklessly” provided. There remains uncertainty around the precise definition of “knowingly” or “recklessly” providing information and further guidance is likely to be required on this.
Whether time can be found for the Bill to pass during this busy parliamentary period remains to be seen, but irrespective of this, TPR’s focus on dealing with poor behaviour by employers in connection with their pension schemes is clearly here to stay.