As noted in our recent update, the Pension Schemes Bill 2020 continues to make its way through the House of Lords on its way to becoming law. The Report Stage, completed on 30 June 2020, resulted in four amendments. What do these changes mean for the Bill?
The new dashboard system is a creation of the Bill aimed to help savers. Dashboards will provide information to people online, allowing them to view their pension information all in one place. It is hoped that this will give greater visibility and transparency to those saving for their retirement.
The Bill has been amended to ensure that, for the first year, the only dashboard permitted will be publicly owned (by the Money and Pensions Service), to allow the dashboard system to bed in prior to opening to commercial market providers. The Bill will also introduce a new Government duty to scrutinise and report on whether the dashboard is functioning effectively.
In terms of the information to be provided by the dashboard, a further amendment to the Bill provides that financial transaction activities (like pension consolidation or transfers) won’t need to be included.
Collective money purchase / defined contribution schemes (“CDCs”)
A legal framework is introduced for CDCs by the Bill. A further approved amendment will now mean that the trustees of these schemes will need to assess, and report on, “the extent to which the scheme is operating in a manner fair to all members”. The results of this assessment must be included in a CDC’s supervisory return to the Pensions Regulator.
Treatment of open defined benefit (“DB”) schemes
The last approved amendment relates to the regulation of open DB schemes versus closed schemes; setting parameters on the regulatory rule making that can be taken by the Secretary of State in relation to such schemes. No change that would accelerate the scheme’s closure, or negatively impact on the affordability of employer and member contributions should be prescribed, in recognition of the fact that the requirements for open schemes must be considered differently to those of closed schemes when it comes to setting long term investment strategy. The amendment also specifies that trustees must retain sufficient discretion to be able to comply with their duty to act in the best interests of the scheme’s beneficiaries.
The Bill’s third reading, the final chance for amendment in the House of Lords, is yet to be scheduled. Thereafter, the Bill will progress to the House of Commons where the Government can either accept the amendments in full, offer alternative amendments, or reject the amendments and send the Bill back to the House of Lords. We will provide further commentary on developments as they arise.
— to www.lexology.com