Pensions legislation and case law update: the latest developments week ended 3 September 2021
In this week’s digest we cover the latest set of Pension Schemes Act 2021 commencement regulations which bring into force on 1 October 2021 a raft of new powers for the Pensions Regulator, extended PPF levy payment terms for those affected by COVID-19, DWP statistics on pensions saving during the pandemic and the pensions industry response to the Regulator’s draft guidance on the new climate change governance and reporting regulations.
Pension Schemes Act 2021 – the Pensions Regulator’s new powers
On 24 August 2021 The Pension Schemes Act 2021 (Commencement No. 3 and Transitional and Saving Provisions) Regulations 2021 were made (the Regulations). The Regulations bring into force provisions in Part 3 of the Pension Schemes Act 2021 (the Act) on 1 October 2021, which includes the Pensions Regulator’s new powers as set out below:
The Pensions Regulator’s new powers
- Criminal Offences – the Act introduces two criminal offences, ‘avoidance of an employer debt’ and partaking in ‘conduct risking accrued benefits’ and also gives the Regulator the power to issue civil financial penalties of up to £1 million in such circumstances;
- Contribution Notices – the Act amends the current contribution notice provisions to include additional matters that can be taken into account when the Regulator is deciding if it is reasonable to issue a contribution notice. The Act also introduces two new tests where, if satisfied, a contribution notice may be served; the employer insolvency test and the employer resource test. Failing to comply with a contribution notice will be made a criminal offence carrying an unlimited fine. Alternatively, the Regulator could levy a civil penalty of up to £1 million; and
- Information Gathering – the Regulator will have its information gathering powers, including interviewing and inspection of premises powers, extended and there will be new fixed and escalating penalties for non-compliance. Providing false or misleading information to the Regulator or trustees will also become an offence risking a fine of up to £1 million.
Transitional and savings provisions
The Regulations also contain transitional and saving provisions which set out how the Regulator's new or enhanced powers will apply to events that occurred before 1 October 2021.
In particular, the new contribution notice provisions, sanctions for avoidance of employer debt and conduct risking accrued scheme benefits (see Criminal Offences Section above) and the new financial penalties provisions do not apply where the act, failure to act or course of conduct occurred before 1 October 2021. Where the act etc. forms a series of acts or where there is a continuing failure these transitional provisions apply where the first act etc. or, the failure in a continuing failure first occurred before 1 October 2021. That being said, the Regulator has stated that evidence that pre-dates the introduction of these new powers may be considered if, for example, it is indicative of someone’s intention.
The savings provisions mean that non-compliance with any notifiable events duty arising before 1 October 2021 is excluded from the new financial penalties brought into force by the Regulations. Further, any interview notices issued before 1 October 2021 and the duties under them will continue to operate under the old regime.
There is also a saving provision amending the definition of ‘administration charge’ to exclude transfer payments from the permitted expenses which can be charged to members of DC schemes.
PPF levy payment terms
The PPF has confirmed that it will allow levy payers to apply for an extension to the payment terms in respect of the 2021/22 levy invoice if they have been adversely impacted by Covid-19. Normally the levy is payable within 28 days of receipt of the invoice with interest charges applying for late payment. However, schemes and sponsoring employers can apply for an extension to this period. The application must be made online within 28 days of receipt of the levy invoice and must detail how the levy payer continues to be affected by the pandemic. The applicant must commit to paying the levy invoice within 90 days. If the application is successful, the statutory interest may also be waived. Alternatively, the PPF may grant permission for the invoice to be paid in monthly instalments over a period of more than 90 days but it is likely that interest charges (albeit reduced for an initial period) will be applied in this scenario.
Pension saving during Covid-19
The Department for Work and Pensions has published statistics on workplace pension participation which illustrate that during 2020 88% of eligible employees (circa 19.4 million people) saved into a workplace pension. This number is similar to the 2019 statistics. The DWP further reports that employee contribution rates also remained relatively stable in 2020 despite the pandemic.
Further clarity requested on Regulator's climate-related risk governance and reporting guidance
The Pensions Regulator released draft guidance for consultation on 5 July 2021 which is intended to assist trustees in complying with the new climate related governance and disclosure regulations which come into force on 1 October 2021 (see our insight update). As part of the response to the consultation, the pensions industry has called for further clarity including in relation to climate risk management, reporting of climate-related risks and opportunities with regard to employer covenant and trustee considerations when setting climate-related targets.
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