• New Pensions Regulator powers brought into force
• HMRC’s pension schemes newsletter provides some reminders and updates

New Pensions Regulator powers brought into force

Regulations have been made which mark an important step in the Pensions Regulator gaining new Pension Schemes Act 2021 powers over scheme sponsors and other parties, including the controversial new criminal offences.

The Pension Schemes Act 2021 (Commencement No. 3 and Transitional and Saving Provisions) Regulations 2021 (SI 2021/950) bring into force, on 1 October 2021, that part of the Act relating to the extension of the Pensions Regulator’s powers.  These include the following:

• The two new Contribution Notice triggers (the employer insolvency test and the employer resources test) – regulations on an aspect of the latter were settled in June (see Pensions Bulletin 2021/27)
• An extension of the matters that can be taken into account when the Pensions Regulator is weighing up whether it is reasonable to issue a Contribution Notice
• The recasting of the “relevant time” as at which the Pensions Regulator estimates the buyout debt that would be due, which informs the sum to be set out in the Contribution Notice – in future the buyout debt will be determined at a scheme year end date close to when the Regulator issues its determination, rather than when the trigger event occurred
• The new sanctions for failure to comply with a Contribution Notice – comprising a criminal offence and a financial penalty of up to £1m
• The two new criminal offences for debt avoidance (“avoidance of employer debt” and ”conduct risking accrued benefits”), along with the alternative financial penalties of up to £1m
• Expanded interview and inspection of premises powers and new fixed and escalating penalty notices – regulations on all of which were settled in June (see Pensions Bulletin 2021/27)
• New sanctions where false or misleading information has been provided to the Pensions Regulator or to trustees
• The new financial penalty regime (on which details of how this is to be operated are still awaited)

However, there are some important transitional provisions the broad effect of which is that none of these new or extended powers apply in relation to duties arising before this date.  In particular, none of the new Contribution Notice powers, the new criminal and civil sanctions for debt avoidance and the new financial penalty regime, apply in relation to acts, failures to act or courses of conduct before 1 October 2021.

There are also some savings provisions to ensure that the new financial penalties do not apply in relation to non-compliance with any ‘notifiable events’ duty arising before 1 October 2021, and separately interview notices issued before this date and the duties under them continue to operate under the old regime.

The regulations also bring into force, from 1 October 2021, an amendment to the definition of “administration charge” which is used to limit permitted expenses charged to members in DC schemes.  The definition is broad and already excludes the provision of pension benefits.  From 1 October 2021 transfer payments will also be excluded from this definition.

Comment

The content of these regulations is as expected, with these new powers coming into force as anticipated with the protection against backdating as promised by the Government back in January.  However, there is some material missing that is needed to complete the picture.  This includes the final updated version of Code of Practice 12 on Contribution Notices (see Pensions Bulletin 2021/23), which will need to be laid before Parliament very soon, and the Regulator’s policy on the new criminal offences, a draft of which was consulted on in March (see Pensions Bulletin 2021/12).

We also understand that the Pensions Regulator will be issuing extensive guidance on how it intends to operate its new powers.  This will hopefully shed light on matters such as when it is likely to go down the criminal offence route (as opposed to a contribution notice investigation), its policy on financial penalties and detail as to its operation of interviews and inspection of premises.  The Regulator’s clearance guidance also needs to be overhauled in the light of the new powers, but it is not clear by when this will be done.

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HMRC’s pension schemes newsletter provides some reminders and updates

HMRC’s latest pension schemes newsletter contains a number of reminders and updates of potential interest to pension scheme administrators.  Three topics are covered – relief at source, annual allowance pension savings (with a reminder that the deadline for issuing annual allowance pension savings statements for tax year 2020/21 is 6 October 2021 – see Pensions Bulletin 2021/32) and migration to the Managing Pension Schemes service.

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