Clarity on dashboards, but delays taint Pension Schemes Act

Peers approved the final version of the pension schemes bill more than a year after it was originally introduced, with the government defeating a number of opposition amendments and thus avoiding “ping-pong” between the Lords and the House of Commons.

The government’s pensions dashboards agenda was the principal beneficiary. Ian Browne, pensions expert at Quilter, noted that there were two “sticking points” between the Commons and Lords.

Important elements of pensions policy still require swift legislative attention

Yvonne Braun, ABI

The first concerned whether dashboards would allow users to engage in financial transactions such as transfers or pot consolidation.

“Opposition peers had concerns that allowing transactions to take place on a commercial dashboard could present an increased risk of fraud, and could lead individuals to make rash decisions with what is most likely to be their most important financial asset,” Mr Browne explained.

“However, the government’s preference is for dashboards to initially be limited to providing a simple ‘find-and-view’ service before evolving to allow transactions at a later date, and today the government had its way.”

The second point of contention was around the date that commercial dashboards can start operating, Mr Browne continued. The government defeated a move that would have seen the introduction of commercial dashboards delayed for at least a year after the rollout of the publicly run dashboard.

Regulator’s new powers ‘dangerously broad’

Not all developments were positive, however. In an upcoming episode of the Pensions Expert podcast, both Arc Pensions Law partner Jane Kola and Society of Pension Professionals president James Riley warned that the broad framing of new powers given to the Pensions Regulator could have wide-ranging deleterious effects.

Ms Kola and Mr Riley said more clarity was needed from the regulator. 

A lack of clarity could be immensely damaging to pension schemes, their sponsors and their lenders, all of whom could find themselves criminally liable for innocent mistakes, Ms Kola explained.

“Some people might go bust over the next couple of years, who otherwise wouldn’t have done, because people are worried,” she warned. “Are we committing an offence or aren’t we?”

Queen blows the half-time whistle

Finally, LCP cautioned that a number of the act’s more substantive measures might not be seen in action until 2022.

Though the act gives the government significant new powers, what they mean in practice must be “fleshed out” in the form of detailed regulations, the consultancy said.

New regulations will be required to govern such things as the introduction of dashboards, collective money purchase (commonly known as collective defined contribution) schemes, climate change governance, the defined benefit funding code, and restrictions on transfer rights designed to combat scams.

Further regulation will also be needed to set out the scope of new powers handed to TPR governing contribution notices, notification of significant corporate events, and interviews and inspections.

The size and scope of the required regulation — combined with the fact much of it will need parliamentary scrutiny — made it impossible for the Department for Work and Pensions to produce it all in one go, LCP argued. Meanwhile, TPR’s new funding code is unlikely to come into force this year.

David Everett, partner and head of research at LCP, said royal assent of the act, while it may feel “like the end of a long journey”, was in fact “more like half-time”.

“To put a new act of parliament into effect requires a large amount of secondary legislation, codes of practice and guidance, and this needs time to be drafted, consulted on and implemented,” he said.

“We expect to see a phased implementation of the new Pension Schemes Act, with the scheme funding powers almost certainly not biting until well into 2022. There will be much for the pensions industry to do in terms of engaging with this process to make sure that everything is fit for purpose.”

Yvonne Braun, director of policy for long-term savings at the Association of British Insurers, sounded a similar note, saying that “important elements of pensions policy still require swift legislative attention”.

She called for “a robust and permanent regulatory regime for superfunds”, adding that development was still needed on extending automatic enrolment coverage and tackling the proliferation of online pension and investment scams.

“The ABI and our members stand ready to work with the government on these important issues, which will help to make the pensions system fit for the future,” Ms Braun said.