The government has tabled amendments to the Pensions Bill that would introduce measures to protect pension members’ benefits against risks associated with new models of pension buyouts.
The government’s aim is to adapt the Pensions Regulator’s powers to an evolving pensions market, which has seen the emergence of new alternatives to pensions buyouts. Some of these arrangements are thought to take away the security of the employer because they are not backed up with adequate capital.
There are concerns that in the event of the pension scheme performing badly the losses would fall of the members or the Pension Protection Fund (PPF). As part of its amendments to the Pensions Bill, the government wants the Pensions Regulator to produce a statutory Code of Practice on contribution notices, which are issued after “an act or deliberate failure to act” over the debt of a pension scheme.
The new test for contribution notices will be based on a “material detriment” where the regulator will have the power to require a contribution to the pension scheme if a sponsor employer’s actions or failures have a materially detrimental effect on the likelihood of members receiving their benefits.
Pensions minister Rosie Winterton, said: “By introducing proportionate powers, which are carefully targeted, we can secure a healthy and innovative pensions industry and security for pension scheme members who have worked hard and saved for retirement.Some new alternatives to pension buyouts have emerged that can put members’ benefits and the PPF at risk.
“We’ve listened carefully to stakeholders and, following further work with interested parties over the summer, we have framed these new powers so that they do not have an undue impact on legitimate business activity. To provide the certainty and clarity the industry needs we have tabled amendments that put the changes onto the face of the Pensions Bill. This includes, among other safeguards, a new requirement on the regulator to produce a statutory code of practice to guide application of the new material detriment test for contribution notices”