Clear, quick, tough. That’s the regulator we have worked hard to become, and the new powers awarded to us under the Pension Schemes Act 2021 support that approach as we all strive to make pensions safer, better and greener.
Now, as we roll out our new corporate strategy, we will ensure savers continue to sit at the heart of all we do. As such, we won’t hesitate to use our powers to protect savers through enforcement when it is the right thing to do, which will punish wrongdoers and deter others.
What we will not do is overstretch the intent and purpose behind the powers. We will always take an appropriate and proportionate approach. I am keen to ensure that the pensions industry understands what we will and won’t do, what we can and can’t do.
Nevertheless, it is perhaps not surprising there has been some heated debate about the reach and remit of the new powers we have been afforded given the sanctions attaching to those powers.
Criminal offences powers
The Act includes two new criminal offences, where action or inaction results in either: 1) the avoidance of an employer debt to a defined benefit (DB) scheme, or 2) a material reduction to the chance of members getting their DB benefits in full. In March we published our draft policy into our approach to the investigation and prosecution of these new powers. Our consultation on the policy currently is live but is closing on Thursday (22 April), so now is your chance to comment.
Several Industry commentators have speculated on the consequences of these new powers. I’ve heard suggestions that competent trustees will resign in fear of inadvertently committing an offence. Personally, as I write, I’ve seen no substantive evidence of this and competent trustees should have no reason to resign.
I’ve seen hotly imagined scenarios stemming from the implementation of our powers as well as debate about where the lines are drawn. The Institute of Chartered Accountants of Scotland aired concerns that the new powers could “potentially catch” normal behaviour. The Minister has made it quite clear the intent is not to achieve a fundamental change in commercial norms or accepted standards of corporate behaviour in the UK. Many scenarios that are presented to us focus on a particular act, but the power requires intent, an act and the absence of a “reasonable excuse”. Together, those represent a high bar.
If you are concerned, may I suggest two routes of action.
Firstly, do get involved in the consultation. Your opinions matter. We don’t make policy in isolation.
Secondly I gave a speech recently that addressed many of these concerns and more, and I would encourage anyone with questions to read it.
Working with industry
When they come into force (expected Autumn 2021) our powers should not worry those who are doing the right thing and properly thinking through the actions and decisions they take. They should, however, cause a deal of anxiety for those who intentionally want to avoid liabilities or put pension savings at risk.
We are not in the business of making the lives of competent and responsible trustees, advisers or employers, or anyone operating in this space, harder. We have the interests of savers at heart and we remain focussed on making workplace pensions work.
We won’t be targeting acts pre-dating the offences coming into force, and nor will we be making rash decisions. We will remain a balanced, proportionate and risk-based regulator. We will maintain a quick, clear and tough approach. We will work with, not against the pensions industry.
The Pension Schemes Act pulls together and clarifies many pre-existing elements of policy, law and practice. In short, it is not a piece of legislation to be feared, except by the minority of wrongdoers. Rather, it will deter wrongdoers from doing wrong, and will allow us to prosecute those who knowingly do harm to savers. That is something we can all welcome.
By David Fairs, Executive Director of Regulatory Policy, Analysis and Advice