New Pension Schemes Bill announced in King's Speech

The Government has announced a new Pension Schemes Bill in the recent King's Speech. As well as the text of the speech, the government has published a set of background briefing notes. At the time of writing, this Bill has not been introduced to Parliament.

This Bill is designed to increase the amount available for pension savers and could help an average earner, who saves over their lifetime in a defined contribution (DC) scheme, to have over £11,000 more in their pension pots with which to secure their retirement income. 

The Bill’s measures include: 

• preventing people from losing track of their pension pots through the automatic consolidation of DC individual deferred small pension pots, 
• ensuring all members are saving into pension schemes, delivering value through the Value for Money framework. This applies to occupational and personal pension workplace pension schemes, 
• requiring trust-based pension schemes to offer retirement products to members by placing duties on trustees of occupational pension schemes to offer a retirement income solution or range of solutions, including default investment options,
• consolidating the defined benefit (DB) market through commercial superfunds, 
• reaffirming The Pensions Ombudsman (TPO) as a competent court, removing the need for pension schemes to apply to the courts to enforce TPO decisions in relation to the recovery of overpayments, and
• amending the Special Rules for End of Life to extend the definition of “terminal illness”, which will allow eligible members within the Pension Protection Fund (PPF) and the Financial Assistance Scheme to receive a lump sum payment at an earlier stage. 

A number of industry figures have published responses to the proposed Pension Schemes Bill: 

Pensions and Lifetime Savings Association (PLSA)’s Director of Policy and Advocacy Nigel Peaple welcomed the Bill, stating in their Press Release that: 

“Particularly welcome are the measures to require schemes to offer decumulation solutions, and the creation of DB Superfunds — both key recommendations of the PLSA. It’s good to see a way forward for small pots and the value for money framework being prioritised too. The National Wealth Fund Bill should also provide pension schemes with a viable vehicle to invest in exciting growth areas. The announced Employment Bill should also bring more people into automatic enrolment and ensure better pension provision for lower earners.”

Lane Clark & Peacock LLP Partner Sir Steve Webb stated in their Press Release that: 

“This Pension Schemes Bill very much represents ‘business as usual’ when it comes to pensions policy. There appears to be nothing in the legislation that so far represents a distinctively ‘Labour party approach’ to pensions, and a Conservative minister could happily have brought forward this legislation. Perhaps inevitably, it will take time before we see how the new government’s agenda differs from that of its predecessor. But this does mean that any distinctive policies will have to await legislation later in this Parliament and may take time to have effect. One initiative that might have been expected in the new Pensions Bill but appears to be missing is legislation that allows the Pension Protection Fund (PPF) to act as a ‘public sector consolidator’ of small Defined Benefit pension schemes. However, it may simply be that the necessary legislation could not be prepared in time rather than that the new government has dropped this idea.”

The information in this article is correct as at 23/07/2024 and is based upon our understanding of legislation, whether proposed or in force, and market practice as at the time of writing. Levels, bases and reliefs from taxation may be subject to change. The Financial Conduct Authority (FCA) does not regulate trust advice.

Sources: 

• https://www.plsa.co.uk/Press- Centre/Press-Releases/Article/PLSA-welcomes-Pension-Schemes-Bill-in-King-s-Speech
• https://www.lcp.com/en/media-centre/press-releases/pension-schemes-bill-business-as-usualstevewebb-lcp