Pensions legislative and regulatory changes in force from 1 October 2021

• Companies and groups with DB schemes
• Trustees of DB schemes
• Investors and lenders
• Advisers

• The new criminal offences are:
  • avoidance of employer debt
  • causing a material detriment to a DB scheme, and
  • failing to comply with a contribution notice.

• Companies and groups with DB schemes
• Trustees of DB schemes
• Investors and lenders
• Advisers

• The draft policy sets out the factors the Regulator will take into account in:
  • determining whether to prosecute an individual or entity for the new pensions criminal offences.
  • assessing whether a person has a "reasonable excuse" for their actions.
• The draft policy highlights the importance for directors and other parties of:
  • considering the impact of corporate activity on a DB scheme and the steps that could be taken to mitigate this, and
  • maintaining contemporaneous written records of this as part of the corporate decision-making process.

• Companies and groups with DB schemes
• Trustees of DB schemes
• Investors and lenders
• Advisers

• The Regulator will be able to impose a financial penalty of up to £1 million in the following circumstances:
  i. failure to comply with a contribution notice
  ii. avoidance of an employer debt
  iii. conduct risking accrued scheme benefits
  iv. provision of false or misleading information to the Regulator or trustees, and
  vi. failure to notify the Regulator about a notifiable event.
• Events i to iii are also covered by the new criminal sanctions.

• Sponsors of DB schemes
• Connected and associated persons

• The two new triggers are:
  1. Employer insolvency test – broadly, has an act or failure to act materially reduced the amount of the section 75 debt likely to be recovered by the scheme on a hypothetical insolvency  of the sponsor immediately after the relevant act or failure?
  2. Employer resources test – broadly, has the act or failure to act materially reduced the value of an "employer's resources" relative to that employer's estimated section 75 debt?

• Sponsors of DB schemes
• Connected and associated persons

• These draft Regulations set out how the resources of an employer should be calculated for the purposes of the new 'employer resources test' CN trigger.

• Sponsors of DB schemes
• Connected and associated persons

• The draft code sets out how the material detriment, employer resources and employer insolvency CN triggers will be interpreted and applied in practice.
• It provides examples of the types of circumstances in which a CN might be issued on these grounds.

• Companies and groups with a DB or DC occupational pension scheme
• Trustees of DB or DC schemes
• Investors and lenders
• Advisers
• Service providers
• Other third parties involved in running an occupational pension scheme

• The Regulator's new powers include:
  • power to compel a person to attend an interview and to answer questions, and
  • extended powers to inspect premises (including where it is considering issuing a CN or a financial support direction).

• Companies and groups with a DB or DC occupational pension scheme
• Trustees of DB or DC schemes
• Investors and lenders
• Advisers
• Service providers
• Other third parties involved in running an occupational pension scheme

• These regulations set out:
  • the information the Regulator must include in a notice issued to compel a person to attend an interview
  • how the new inspection powers apply for multi-employer schemes, and
  • the fixed and escalating penalty rates for non-compliance with information-gathering requests.

• Trustees of DC occupational pension schemes

• The draft regulations contain a number of changes that will affect DC occupational pension schemes, including:
  • a requirement to disclose the net investment returns for their default and self-selected funds
  • DC schemes with total assets of less than £100 million that have been operating for at least three years will be required to assess and report more extensively on the value they offer to their members, and
  • measures to smooth the impact of performance fees on funds subject to the charge cap.

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• Trustees of DB schemes with more than £5 billion worth of assets
• Trustees of authorised master trusts and collective money purchase schemes
• Companies and groups with large DC schemes or collective money purchase schemes

• The primary obligations under these new regulations include:

1. 1. new governance requirements
   2. scenario analysis
   3. metrics and targets, and
   4. TCFD reporting.

• Trustees of DB and DC occupational pension schemes
• Pension providers
• Administrators

• The draft regulations ( due to be implemented in Autumn 2021) set out four new statutory conditions, one of which must be met before a statutory transfer can proceed. The conditions are
  1. low risk transfer
  2. employment link
  3. transfer to QROPS with residency link, and
  4. no ‘red' or 'amber' flags (although transfer can proceed if only amber flags are present and a member has received specialist scams guidance).