Charles Counsell, Chief Executive of The Pensions Regulator (TPR), welcomes the Pension Schemes Bill at a launch event at the House of Commons.
Pensions Schemes Bill
Thank you for the opportunity to welcome the Pensions Schemes Bill, and to highlight how it will support our commitment to be a clearer, quicker and tougher regulator.
I would like to briefly focus on a few key areas of the Bill in relation to our regulation of defined benefit (DB) pension schemes.
Starting with funding powers, these will mean we are clearer about our expectations and we can be quicker in taking tough action where we have concerns.
Schemes and sponsoring employers will need to demonstrate to TPR how their approach is prudent and appropriate.
DB Strategy Statement
The new DB Strategy Statement has the potential to improve accountability for and transparency of decision-making, long-term funding strategy and risk management.
Pension liabilities will have to be set in the context of a long-term funding objective and any Recovery Plan to address deficits will need to be appropriate.
Improved clarity in our code of practice and from the funding legislation will better equip us to take enforcement action where standards are not met.
DB funding code
Early in 2020, we will be consulting on a revised DB funding code to introduce clearer funding standards, supported by changes to funding legislation.
In addition to the funding measures, the Bill also seeks to streamline some of our existing powers making them easier to use.
For example, better information gathering powers - including power to compel interview attendance - will complement our drive to be quicker and more effective.
We know that where voluntary interviews have occurred, this has sped up case progress. A single, consistent ‘toolkit’ across all our functions, to complement what already exists in the DB area.
New civil penalties
And the introduction of new civil penalties where there is non-compliance with our request for information would be a swifter and proportionate alternative to criminal prosecution in some cases.
I would also like to mention how our oversight of corporate transactions will be improved through a stronger notifiable events and declaration of intent process.
Sponsoring employers or parent companies will be required to provide a declaration of intent to us, copying trustees, evidencing consideration of any impact to the scheme from a proposed transaction and setting out the proposed mitigation, as soon as practicable.
The declaration will also need to include details of the communications they have had with trustees on the proposed transaction. We will revise our clearance guidance to make expectations more explicit, with more useful examples.
As a result, trustees and TPR should be sighted on major corporate activity and have the opportunity to engage with employers on appropriate mitigations.
The Bill makes provision for a new criminal offence and a new civil penalty of up to £1 million.
Fines and criminal sanctions, combined with improved avoidance powers, have the potential to act as a strong deterrent in respect of behaviour that represents a risk to savers.
We welcome this in line with our commitment to taking criminal action to protect savers - we are being bolder in using more of our powers. TPR now has an established team who have successfully brought 23 criminal prosecutions over the past two and a half years.
Recent prosecutions have led to TPR’s first custodial sentence of more than three years, while total fines and costs imposed by the courts in TPR prosecutions now run into hundreds of thousands of pounds.
Criminal prosecution would be a high bar and we would only use this power in the right circumstances. Fortunately, the most egregious behaviour is rare. The vast majority of sponsoring employers and trustees want to do the right thing.
And in relation to civil fines up to £1 million, this is a big increase from the existing position which would give us flexibility to issue fines at the appropriate level depending on severity.
I will hand over to others to talk about Collective Defined Contribution (CDC) and the pensions dashboards, but we also welcome the innovation of CDC if this can provide better outcomes for savers and employers without increasing risk. We are working closely with government to ensure an effective regulatory regime.
We support new powers to protect individuals’ pension savings. Pension Dashboards will be a vital tool for savers to understand their pensions and plan for retirement. At TPR, will work closely with the Department for Work and Pensions (DWP), Financial Conduct Authority (FCA), the Money and Pensions Service and the industry delivery group in order to make Pension Dashboards a success.