The Pension Schemes Act 2021 introduces significant reforms of the regulatory regime for defined benefit (DB) pension schemes.
The Act introduces new criminal offences and civil sanctions which could be applied to company directors, lenders, investors, sellers, purchasers and advisers who take action which, broadly speaking, is materially detrimental to a DB scheme and where they do not have a reasonable excuse for their actions.
These new offences and sanctions are broad and have the potential to:
- impact corporate activity, including M&A and the payment of dividends in certain circumstances;
- restrict the scope for distressed businesses with DB pension schemes to secure fresh investment or take on additional debt, particularly where the scheme has a material deficit; and
- impact the feasibility, manner and desirability of restructuring a business or group with a DB scheme.
These new powers are not expected to come into force until mid-2021 at the earliest to give the Pensions Regulator time to consult on and issue guidance on how and in what circumstances it plans to exercise them.
Our pensions team has published a briefing which discusses the implications of the Act in more detail.
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