At present there is no Act of Parliament which provides a framework within which DB superfunds could operate. In the absence of such legislation, the Pensions Regulator published its own interim guidance for Superfunds in June 2020 (see: Guidance for DB superfunds | The Pensions Regulator) but no Superfunds have yet been authorised and no transactions have yet taken place.
However, recent documents and statements from the Pensions Regulator (TPR) suggest that progress on primary legislation may be made sooner than expected.
Buried in the recently-published TPR Corporate Plan is a section on Superfunds which specifically refers to the potential for a ‘legislative framework’ for superfunds, and TPR say that
“we anticipate [this] being introduced from 2022-23”
(Source: TPR Corporate Plan, published May 2021);
Although this document is a statement by TPR rather than DWP, there is no doubt that DWP will have had the opportunity to comment on a draft and could have asked for this comment to be removed if they disagreed.
Further evidence that TPR is pressing for legislation in this space at the earliest opportunity came in a recently recorded interview between TPR CEO Charles Counsell and Stephen Timms MP, Chair of the Work and Pensions Committee which can be fond at: Stephen Timms and Charles Counsell on the challenges and opportunities facing the pensions industry
At 7 mins 40 secs through the recording, Charles Counsell says: “We passionately believe that we must get superfunds onto a statutory footing. The interim regime is good, but this is only as good as people engaging with it. So, putting that on a statutory footing is hugely important.”
In addition, DWP is due to respond to its own consultation on DB consolidation published as long ago as December 2018, and this document is widely expected before the summer. This will require remaining differences within government to be resolved over the future direction of Superfund policy.
Commenting, Shayala McRae, Senior Consultant at LCP said: “It was a surprise to see the Regulator set out its expectation of legislation on superfunds in 2022/23. Given the absence of a Pensions Bill in the 2021 Queen’s Speech, this is the earliest that legislation could be brought forward and is a positive sign. This is reinforced by the very strong language used by the CEO of the Regulator when he talked of TPR being ‘passionate’ about the need for a statutory basis for Superfund regulation. After a long delay it would be most welcome to see legislation in this area so that trustees and sponsors can consider superfunds as a potential destination with confidence around the regulatory environment”.
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