Commenting, David Everett, partner and Head of Research at LCP said: “Although this feels like the end of a long journey, in reality it is more like half-time. To put a new Act of Parliament into effect requires a large amount of secondary legislation, Codes of Practice and guidance and this needs time to be drafted, consulted on and implemented. We expect to see a phased implementation of the new Pension Schemes Act, with the scheme funding powers almost certainly not biting until well into 2022. There will be much for the pensions industry to do in terms of engaging with this process to make sure that everything is fit for purpose”.
Karina Brookes, Leader of EY’s UK Pensions Strategy team, comments: “Pension scheme trustees have been at the corporate stakeholder table for some time now but this Bill reinforces the need that they should be at the forefront of the corporate mind.
“It has never been more important for corporates which sponsor UK defined benefit schemes and their pension scheme trustees to work together with openness and transparency if they are to achieve optimal outcomes for sponsor and pension members alike.
“It is essential that sponsoring corporates are on the front-foot when it comes to engaging their pension scheme trustees – in some cases, their largest creditor – around any intended major changes to the business including dividend policy, reorganisation, restructuring and transactions.”
Commenting on the debate, Mike Smedley, partner at Isio, said: “The House of Lords lost its proposed amendment to give special protections to open defined benefit schemes such as universities and the railways, but it won a softening of the hard edges of the proposed regulation which will go much further. The government’s assurances to soften the proposed funding rules will benefit many defined benefit schemes and sponsors.
“The Lords’ main challenge to the Bill sought to protect open pension schemes from rules which might push them to de-risk investments or ultimately close. The Lords withdrew their amendment in return for strong commitments from the government about future regulations and Pensions Regulator guidance that allows for bespoke treatment for all.
“The Pensions Regulator will need to do some re-thinking as a result – which might explain the long delay in the arrival of the defined benefit funding code.
“The industry will welcome newly won commitment to flexibility with open arms. Many were concerned that the Regulator’s Code would become a one-size-fits-all approach. But it might not all be as rosy as it sounds. The potential fly in the ointment is that sponsor covenant remains a critical piece of the jigsaw, and an open scheme may need a cast iron sponsor to justify their position.”
The government has committed to further consultation on the secondary regulations as well as the Pensions Regulator’s Code, with the Pensions Bill now unimpeded in its path to Royal Assent.
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