Pension Schemes Bill

Photo by Yassine Khalfalli on Unsplash

Richard Farr explains what the Pension Schemes Bill might mean for trustees and sponsors.

It’s official, the Pensions Regulator (TPR) is about to get tougher. The Pension Schemes Bill will strengthen TPR, giving it enhanced powers take action against sponsors and individuals. The new legislation will introduce:

  • Two new tests for contribution notices;
  • New criminal offences for individuals, with the sanctions of up to seven years’ imprisonment and financial penalties;
  • Changes to information gathering powers for TPR; and
  • New trustee duties including to prepare a written ‘statement of strategy’ signed by the chair of trustees.

Trustees may take some comfort from changes to legislation that could dissuade excessive dividends / share buybacks. In addition, it is not just shareholder returns which are likely to face scrutiny, any inappropriate preference (financial or otherwise) shown to another stakeholder could fall under the microscope.

The Bill provides TPR with more powers to act in these situations and to demand more information in relation to notifiable events such as transactions. Overall, stakeholders should expect increased (and stronger) engagement from TPR in the future.

In preparation, trustees should look to educate and work with sponsors on the ramifications of the Bill and ensure that there is a framework in place for the timely and accurate sharing of information, particularly when corporate activity occurs.

For sponsors, there may be alarm at TPR’s new powers and the potential for severe penalties where conduct is deemed to have put accrued scheme benefits at risk. This may be particularly concerning in the present environment, where sponsors face difficult decisions in the allocation of cash-flows against the backdrop of COVID-19.

However, being able to point to objectively “reasonable” behaviour in specific circumstances is always a starting point, and seeking specialist advice in advance of any significant corporate events will help to protect directors.

Written by Richard Farr, Managing Director

This blog follows a recent webinar we presented with the Institute for Turnaround (IFT). Watch the IFT webinar.

Read IFT’s report ‘Unlocking Value, Saving Jobs: The Contribution of Turnaround to Business and People’.

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