It may have been in like a lion but it certainly seems to be going out like a lamb. We finally have the long-awaited Pensions White Paper but don’t hold your breath that it will lead to substantial change any time soon.
The White Paper, which is a response to last year’s Green Paper is fairly short on specifics, relying on further detailed consultation.
Looking first at what the Government won’t be taking forward, this includes:
- measures to override scheme rules and allow the inflation basis to change from RPI to CPI;
- shortening the timeframe within which to obtain a scheme valuation;
- changes to the multi-employer debt provisions over and above the changes coming into force this April; and
- a legislative “duty to co-operate”.
What the Government will be looking at in more detail:
Protecting private pensions by creating a stronger Pensions Regulator including through:
- giving the Regulator power to levy punitive fines against those who deliberately put their pension scheme at risk, with the possibility of the Regulator being able to issue fines retrospectively from the date of the White Paper;
- making it a criminal offence to commit wilful or grossly reckless behaviour in relation to a pension scheme and continuing to look to disqualify company directors where such behaviour has occurred;
- strengthening the existing notifiable events framework (including looking to require notifications before the event has occurred) and clearance regime; and
- extending the circumstances in which the Regulator can compel attendance at interviews, apply civil sanctions through fixed and escalating penalty notices and inspect premises given the perceived effectiveness of the use of such powers in the auto-enrolment environment.
Improving the way the system works – scheme funding by:
- revising the existing defined benefit funding code of practice to clarify the funding standards expected and to make compliance with the revised code a statutory requirement; and
- requiring DB scheme trustees to appoint a Chair and to produce a Chair’s Statement to be submitted with each triennial valuation. Penalties would be imposed where there is non-compliance as currently occurs in the DC regime.
Improving the way the system works – consolidation by:
- consulting on proposals for a legislative framework and authorisation regime within which consolidation vehicles could operate, whilst at the same time protecting the benefits of members;
- consulting on an accreditation scheme for consolidation vehicles;
- raising awareness of the possible benefits of consolidation; and
- making minor amendments to GMP conversion legislation to enable benefit simplification.
The White Paper recognises that most of what is being proposed will require further consultation and primary legislation. Accordingly, whilst additional consultation will take place during 2018 and 2019, no primary legislation is likely to flow from this until the 2019-2020 parliamentary session at the earliest.
Whilst the content of the White Paper may well reflect the Government’s view that there is no wide spread deliberate activity by employers to avoid their scheme liabilities, it is also clear that the Government has backed away from some of the more far reaching reforms initially discussed in the Green Paper and one can’t help but wonder whether with Brexit there is no capacity at the moment to do anything more radical. What is apparent is that the effectiveness of most of the White Paper’s proposals will rest on the Pensions Regulator being the clearer, quicker and tougher regulator it has promised to be.