UK Pensions – What's changing for occupational pension schemes on 1 October?
A raft of changes for trustees and sponsoring employers of occupational pension schemes are coming into force on 1 October, with many of the key provisions of the Pension Schemes Act 2021 applying from that date. We set out below a summary of these changes, together with links to further information.
New criminal offences
The new criminal offences of avoidance of employer debt and conduct risking accrued scheme benefits will apply to acts (and failures to act) occurring on or after 1 October 2021. These offences are punishable by an unlimited fine or up to seven years’ imprisonment (or both). The Pensions Regulator will also be able to impose a civil penalty of up to £1 million on individuals who are party to such acts (including those who knowingly assist in the act). We think properly managed businesses and their directors have little to fear from the new criminal offences. However, it is important to know about the risk of action by the Regulator and consider the potential impact on the scheme when taking financially significant decisions.
New contribution notice powers
The Pension Schemes Act 2021 includes several changes relating to contribution notices (CNs). CNs can be issued by the Regulator as a means of imposing funding liabilities on employers who sponsor defined benefit pension schemes, as well as those connected or associated with such employers. The changes coming into force on 1 October include:
- two new grounds for issuing a CN (the employer insolvency test and the employer resources test);
- an amendment to the reasonableness criteria for issuing a CN so that the Regulator can take into account the effect of the target’s act or failure on the scheme's assets or liabilities;
- a change to the relevant time for calculating the amount due under a CN; and
- new sanctions for failing to comply with a CN.
Potential targets should familiarise themselves with these changes to the CN regime.
Other changes to the Pensions Regulator’s powers
Several other changes aimed at strengthening the Regulator’s powers will apply from 1 October:
- the new civil penalty of up to £1 million for failure to comply with the existing notifiable events regime;
- the extension of the Regulator's information-gathering powers, including:
- the extension of the Regulator's power to require individuals to attend an interview;
- the extension of the Regulator's power to inspect premises; and
- the new power to impose fixed and escalating civil penalties (as an alternative to criminal sanctions) for non-compliance with the Regulator's information-gathering powers; and
- the new civil penalty of up to £1 million for the provision of false or misleading information to the Regulator or the trustees.
Climate change
New requirements for occupational pensions schemes to align their governance processes and disclosures with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations will apply to schemes with £5 billion or more in assets and authorised master trusts from 1 October 2021. Amongst other things, trustees in scope will need to carry out scenario analysis, calculate and use metrics and measure performance against trustee-set targets.
For more information, please speak to your usual Linklaters contact.