The Pension Schemes Act reminds us that workplace pensions mean different things to different employers. The dividing lines are between big and small, and defined benefit (DB) and defined contribution (DC).
Very large employers have the opportunity to explore whether a collective defined contribution (CDC) scheme is right for them and their respective workforce. Auto-enrolment has very successfully created a workplace pensions culture, but it remains to be seen whether it delivers benefit adequacy or most effective benefit delivery. CDC might be an interesting alternative for those with scale.
All employers can take a keen interest in the Act’s environmental, social and governance (ESG) developments too but those with scale may be better able influence climate risk management, and even impact investment, through the consultation – formal or informal – process with their schemes.
Pensions dashboard developments under the Pension Schemes Act will place additional pressure on in-house administration currently stretched by guaranteed minimum pension (GMP) related activity. In the period to 2023 and beyond, in-house administration will need to prepare to deliver on data quality and disclosure obligations. Dashboard development may also help employers deliver enhanced fin-tech related services which support integrated workplace wealth and health solutions.
Employers with DB schemes will be understandably pre-occupied with the continued management of liabilities often associated with former workers. For them, the huge fines and criminal sanctions arising under the Act mean that the position of a DB scheme will need very careful thought in relation to corporate activity. Regulatory policy provides some reassurance, but corporate behaviours are already beginning to change including in relation to activity which employers might previously have considered to be business as usual. Although the fines and sanctions are chiefly designed to protect DB schemes, they do apply to DC schemes too.
Employers generally need to make sure that information sharing does not mislead the Regulator in any way. Obviously employers should be working on this basis anyway, but the new, tougher powers mean that investigations, information requests and even standard forms need to be handled very carefully indeed.
Tom Barton is a partner at Pinsent Masons