Last reviewed 15 February 2021
When the Pension Schemes Bill received Royal Assent on 11 February, the Department for Work and Pensions (DWP) hailed the new Act as a landmark moment for UK pensions.
Describing the legislation as the biggest shake-up of UK pensions for decades, it said that it will bolster protections for savers while furthering the Government’s green agenda by supporting progress towards net zero (through climate risk reporting).
The Act will extend the powers of the Pensions Regulator, introducing the power to issue civil penalties of up to £1 million, alongside three new criminal offences.
A tough new sentence has been created — with a maximum penalty of seven years in prison — for bosses who “run pension schemes into the ground”, or plunder pots to line their own pockets.
This will, the DWP said, deter employers from making reckless decisions with their defined benefit schemes and strengthen the Regulator’s powers to take efficient and timely actions to protect members’ hard-earned savings.
The Act also legislates for the creation of a new style of pension scheme — Collective Defined Contributions (CDCs). Developed in co-operation with trade unions, CDCs have the potential to increase returns for millions, whilst being more sustainable for both workers and employers.
Minister for Pensions, Guy Opperman, said: “This Act makes our pensions safer, better and greener, as we look to build back better from the pandemic. Its passage will reassure savers that they can, and will, have a retirement they deserve”.
He also highlighted the introduction of pensions dashboards, creating one single platform to more easily access and review pension pots. Savers will be able to see how much they can expect each month in retirement, and find out how they can improve their retirement prospects.
The full text of the Pension Schemes Act 2021 can be found at https://www.legislation.gov.uk/ukpga/2021/1/pdfs/ukpga_20210001_en.pdf.
Comment by Kate Palmer, HR Advice and Consultancy Director at Peninsula
More and more employees will be looking towards future job security, especially now that the coronavirus may mean that a lot of employees retire with less in the pot that they usually would.
For this reason, and with these new penalties in mind, employers will likely be more vigilant when adhering to pension laws.