Pensions Weekly Update: Part One

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Here is part one of our weekly summary of key legal and regulatory developments relevant to occupational pension schemes, with a focus on the Pension Schemes Bill.

The public bill committee has finished its scrutiny of the Pension Schemes Bill early. The bill will now return to the House of Commons for the report stage and third reading before making its way to the House of Lords. The public bill committee is no longer able to receive written evidence. If further amendments are proposed to the bill by members of Parliament at the report stage, the speaker of the House of Commons will choose the amendments that will be considered. As yet, no date has been scheduled for the report stage.
There was much discussion of the bill (362 pages of transcript) at the committee stage. The government’s reserve power to mandate the asset allocation of a certain proportion of pension scheme assets continued to be the most contentious part of the bill, with discussion around this starting at Page 202 of the transcript. An amendment proposed by Mark Garnier (Conservative) to delete all clauses relating to mandation was rejected. Despite the lengthy debate, the reserve power was agreed and is here to stay (for the time being, anyway). In fact, all government amendments tabled in relation to the scale and asset allocation requirements of the bill (Part 2, Chapter 3) were agreed and will be added to the bill. This included the insertion of a definition of main scale default arrangement.
Generally, most of the amendments (save for a couple of inconsequential amendments) that were tabled by Torsten Bell on behalf of the government have been incorporated into the bill, while the majority of amendments tabled by other members of Parliament have not been incorporated into the bill. In some instances, this was down to faulty drafting of the clauses, rather than the principle of the amendment. For example, an amendment tabled by John Milne (Liberal Democrat) that the Pension Protection Fund (PPF) administration levy be abolished was rejected. However, this was because Torsten Bell said that the proposed wording, as drafted, would not work. He went on to say that the government would be putting forward some alternative wording to deal with this issue at a later date. The administration levy covers the PPF’s administration expenses and is collected by The Pensions Regulator (TPR). An independent review of the PPF carried out in 2022 found that the levy was an unnecessary complication, and recommended its abolition and that administration expenses should be collected via the PPF’s own levy.
On the value-for-money framework, an amendment tabled by the government to clarify that the framework applies to hybrid schemes was agreed and will be added to the bill.
The new clauses tabled introducing a “Virgin Media remedy” were agreed and added to the bill. The text of the Virgin Media remedy clauses can be found at Page 82 of a document detailing the fate of each amendment tabled. For a summary of the Virgin Media clauses, please see our weekly update of 3 September.
Other amendments that had been proposed to the bill, which we covered on 3 September, have been rejected. These include an expansion of the release of surplus provisions, such as (1) setting the release of surplus threshold at buyout level, (2) introducing additional member notification requirements, and (3) introducing a requirement that surplus could not be released before all pensions receive annual increases in line with the consumer prices index. The pensions minister said that the government is minded to lower the threshold at which surplus could be released to full funding on the low dependency basis. An amendment tabled by the government to clarify that the release of surplus provisions would not apply in relation to winding up scenarios was agreed and will be added to the bill.
Other amendments proposed elsewhere addressing the lack of statutory increases to pre-’97 private pension amounts were rejected. In relation to amendments addressing the lack of pre-’97 compensation for Financial Assistance Scheme and PPF members, the pensions minister said, “We are considering the issue, but it needs to be considered in the round because of the wider public finance implications.”
An amendment tabled that would prevent any person who “has a personal or financial interest in the pension scheme except for member-nominated trustees” from acting as a pension trustee was also rejected. Addressing concerns around conflicts of interest of trustees, the pensions minister said that there will be a consultation later in the autumn to strengthen trustee governance.
Finally, a proposal to change the way that UK companies account for defined benefit deficits in their report and accounts was also dropped.
Watch out for Part 2 of our weekly update, later this week.