Pension Schemes Act 2021 becomes law

Writes James Philips

Enhanced criminal and civil sanctions for defined benefit (DB) scheme negligence have become law after the Pension Schemes Act 2021 gained its place on the statute book.

Over a year after first being introduced to the Houses of Parliament, Royal Assent was granted today (11 February) to the wide-ranging legislation following a final debate last month.

As well as greater DB protections and punishments, the act contains provisions for the establishment of the pensions dashboard project and collective defined contribution (CDC) schemes. It also puts additional reporting requirements on trustees for ESG-related issues.

Pensions and financial inclusion minister Guy Opperman has on multiple occasions promoted the legislation as a way to “make pensions better, safer and greener”.

However, while pensions negligence could now result in a jail sentence, there are several areas of the legislation that need further clarification through secondary legislation or regulatory guidance or codes.

One such area is the DB code of practice which, after a first round of consultation by The Pensions Regulator on its underlying principles, now awaits a second consultation on its actual implementation, which is due to begin later this year.

Further secondary legislation is expected on CDC schemes and dashboards – while a statutory framework for the regulation of DB consolidators, or superfunds, was completely absent from the act and is expected to be consulted on and legislated for separately.