In its written submission to the Public Bill Committee inquiry on the Pension Schemes Bill, the PLSA has argued that while it supports the overall thrust of measures in the Bill, and it includes very welcome changes to the statutory pension transfer regime to protect against scams, there are certain areas which would benefit from further clarification and amendment.
The PLSA also called for amendments related to the clauses on Pension Dashboards and noted that the Bill does not deal with two major issues: implementation of the Government’s promise to modestly enhance automatic enrolment contributions in the mid-2020s; and consideration of how best to ensure people make the right choices under the Pension Freedoms.
TPR powers and Section 107
The PLSA supports the provision of enhanced powers to the Pensions Regulator (TPR) to tackle incidents of ‘reckless’ behaviour by employers. However, under the current wording, section 107 would unintentionally criminalise ordinary business activities and could have unintended negative consequences for pension schemes and pension savers.
These measures could prevent legitimate actions to make pension benefits more secure and discourage trustees, who include workforce representatives, from taking part in pension scheme governance. Instead of focusing on employers and high-level associates of pension schemes, these new criminal offences could apply to anyone involved with schemes such as trustees, banks that lend to employers, insurers and investment counterparties.
Section 107 as drafted needs greater clarity and the PLSA has recommended amending the scope of these new powers, the circumstances that they are intended to be used, and a narrowing of whom the new powers could and should affect.
Pension scams
The PLSA supports the inclusion in the Bill of measures re-establishing an employment link as an important protection for savers against scams and would like the Government to further allow trustees to stop the transfer of a saver’s pension benefits where it identifies known red flags.
Pension Dashboards
The Bill also provides the legislation to pave the way for Pension Dashboards, which will enable savers to access their pensions information online, securely and all in one place.
The PLSA has argued that the Government should ensure the first pensions dashboard will be a single, non-commercial product hosted by the Money and Pensions Service (MAPS) and that no other dashboard should go live until a full consumer protection regime is in place. New amendments tabled by the Government would allow dashboards to be used to provide transactional services and remove a one-year bedding in period. The PLSA believes that these new amendments place people at risk of losing their life-savings if they fall prey to pension scammers or mis-selling. The PLSA has argued in its submission that these amendments should be withdrawn.
Automatic enrolment
The PLSA is disappointed that the government has passed up an opportunity to fulfil its 2017 commitment to extend the scope of automatic enrolment (AE) in respect of age and earnings – by changing the threshold from age 22 to age 18, and by removing the Lower Earnings Limit. This Bill should include the necessary changes to primary legislation, with commencement in the mid-2020s.
While it is clear that right now, as the country faces the economic fallout from Covid-19, is not the right time to increase automatic enrolment contributions, it is reasonable to introduce such modest changes to come into effect around five years or more from now.
Decumulation of DC schemes
Many savers are facing very complex decisions as they approach retirement and some may be losing out. The PLSA published recommendations in October for a new regulatory framework to enable schemes to support members as they approach and make their retirement decisions. The PLSA would like to see legislation brought forward in this or the next Pension Schemes Bill to support savers to get a better income in retirement.
Nigel Peaple, Director of Policy & Research, PLSA said: “Workplace pensions provide an essential retirement income for millions of people so it is vitally important the £2 trillion pensions sector has legislative clarity.
“The Pension Schemes Bill does many useful things, such as strengthening the powers of the Pensions Regulator to protect members, creating Pension Dashboards, and enhancing the transfer regime to protect savers against pension scams. These measures will help more people have a better income in retirement.
“However, there are number of areas in the current wording of the legislation that we have identified for improvement and others that are missing.
“We welcome measures to prevent scheme sponsors from deliberately evading their responsibilities but the current drafting of Section 107 casts the net far too wide and well beyond the intended targets. This is a significant issue which many of our members have raised concerns about.
“It is also disappointing that this Bill has not yet scheduled the planned mid-2020s removal of the lower earnings limit to automatic enrolment contributions and lowering the enrolment age from 22 to 18 years of age, meaning millions missing out on extra saving with employer support and tax relief.
“We hope the Government will seek to resolve these issues by amendment or miss the opportunity to help millions of savers.”
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