Pensions legislation and case law update: the latest developments week ended 23 April 2021

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In this week’s update, we look at the Pensions Regulator’s blog on the new criminal offences, the appointment of a new chair to the Regulator and the PPI’s final report in its Engaging with ESG series

The pensions regulator blogs on its new criminal offences powers


David Fairs, Executive Director of Regulatory Policy, Analysis and Advice at The Pensions Regulator (the Regulator) has published a blog, "Time for some perspective on our criminal offences powers".

(By way of reminder the two new criminal offences in the Pension Schemes Act 2021 are avoiding an employer debt to a defined benefit (DB) pension scheme and behaviour risking accrued DB scheme benefits.)

The blog closely follows the Regulator's March 2021 draft policy and consultation on how it will investigate and prosecute the new criminal offences (see our In Depth Insight) and reiterates that, although the Regulator will not "hesitate" to use its powers to "protect savers", it will not "overstretch the intent and purpose behind the powers" and will "always take an appropriate and proportionate approach".

The blog points to the fact that the powers require intent, an act and the absence of 'reasonable excuse', not just a particular act in isolation, and as such the offences have a "high bar" that would need to be met before the Regulator could use its powers in respect of them. 

As regards retrospectivity, the Regulator confirms that it will not be targeting acts which pre-date the offences coming into force and notes the Government's confirmation that the new offences will not be retrospective (albeit, the draft policy notes that evidence pre-dating the offences coming into force could be relevant to a Regulator investigation afterwards).

Key point: 

The blog is designed to allay the concerns of the pensions industry about the remit of the new powers and how they will be enforced. Whilst this latest communication from the Regulator is helpful, concerns are likely to remain, at least until it is seen how the new powers will be implemented in practice. Indeed, the industry's responses to the Regulator's consultation to date indicate this is the case – there have been calls from several bodies including the Pensions Management Institute, the Society of Pension Professionals and the Pensions and Lifetime Savings Association for further clarity from the Regulator on the offences, especially to address fears regarding the potential impact on 'normal' corporate behaviour.

For those with concerns, Mr Fairs urges them to get involved in the consultation and to read a 30 March 2021 speech which he gave that discusses the new legislation and how the Regulator intends to implement it.

Appointment of Sarah Smart as chair of the Regulator


The appointment of Sarah Smart as the chair of the Regulator has been confirmed by the Work and Pensions Committee (the WPC) following its assessment of Mrs Smart's suitability for the role. 

Part of the pre-appointment hearing included discussion of a potential conflict of interest resulting from Mrs Smart's spouse's role as Chief Executive of British Airways Pension Services Limited. Mrs Smart informed the WPC that her spouse has plans to leave his British Airways' role by September 2021 as a way of managing the potential conflict. At the request of Mrs Smart, further details of her interests have been published on the Regulator's website and the Regulator is urgently reviewing its Code of Conduct and related rules.

Key point: 

Mrs Smart has been acting as Interim Non-Executive Chair of the Regulator since April 2021 and has been a Non-Executive Director since 2016. She also sits as an independent member on the Investment and Funding Committee of the Unilever UK Pension Scheme and as the independent Chair of the Financial Times Governance Committee. Further details of Mrs Smart's profile and the strategic leadership responsibilities of the chair can be found here. 

PPI'S ESG report calls for expansion of ESG considerations


The Pensions Policy Institute's final report, Engaging with ESG: Environmental, Social and Governance Factors considers how pension investment strategies take into account ESG factors and looks at future "opportunities, challenges and proposals for effective support to encourage evolution and improved risk mitigation".

Key point: 

One of the key messages from the report is the recent emphasis there has been on climate change rather than on other ESG factors and the need for schemes to also focus on these other areas. It notes that although there has been a positive uptake in recent times around ESG there is still a long way to go and five areas are identified where development could assist in improving progress; integrated goals, engagement and stewardship, innovation from third parties, increasing knowledge and understanding and standardised data and definition.

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