The Department for Work & Pensions has, this morning, announced the Government's plans to overhaul the powers of the Pensions Regulator and impose stricter duties on employers with defined benefit pension schemes, particularly when entering into corporate transactions which may affect the scheme.
The key proposed changes, some of which are intended to be retrospective (to today), include the following amendments to the pensions regulatory regime:
- introducing a criminal offence to punish directors (or connected persons) guilty of "wilful or grossly reckless behaviour" in relation to a pension scheme;
- strengthening the existing process to disqualify directors in cases of "mismanagement or systemic avoidance of pension obligations";
- giving the Regulator powers to punish "irresponsible activities that may cause a material detriment to a pension scheme and may compromise the scheme’s funding position" including by way of punitive fines. This change may be implemented so that it applies retrospectively from today;
- requiring employers, before they enter into a corporate transaction, to consult with the pension scheme trustees to issue a statement of intent to confirm that they have appropriately considered the impact on the pension scheme. This statement must clearly set out how a company proposes to mitigate any impact of the proposed transaction on the scheme. This will be reinforced by the strengthening of the notifiable events framework so that employers must notify the Regulator at an earlier stage where corporate activity may affect the pension scheme;
- giving the Regulator more information-gathering powers, including the power to compel any person to submit to an interview and the ability to inspect documents and electronic devices, backed up by the power to issue civil sanctions for non-compliance;
- strengthening the Regulator's ability to enforce funding standards, and requiring trustees to appoint a Chair who will report to the Regulator at regular intervals;
- considering further how to strengthen the voluntary clearance regime; and
- considering further whether to introduce a general "duty to co-operate" with the Regulator. Any such duty would represent a major change from the "reactive" employer engagement regime which currently applies, where, broadly speaking, employers can set the parameters of engagement with the Regulator in many circumstances.
If you have any questions, please speak to John Gordon in our Pensions team, whose contact details are set out below.
