Pension Schemes Bill receives Royal Assent.
Bosses who run pension schemes into the ground, or plunder pots to line their own pockets, now face up to seven years in prison.
This will hopefully deter employers from making reckless decisions with their defined benefit schemes and strengthen the regulators’ powers to take actions to protect members’ savings.
Tom Selby, senior analyst at AJ Bell, said: “The government has responded to the high profile failure of a number of DB pension schemes – and particularly the case involving former BHS boss Sir Phillip Green – by handing The Pensions Regulator (TPR) tough new enforcement powers, including fines of up to £1m for individuals who knowingly neglect their responsibilities to members.
“It is not clear exactly how this might play out in practice, and in particular whether it will be possible to prove an employer has knowingly neglected its DB scheme. Many will therefore argue this is an example of the government bolting the stable door long after the horse has bolted.”
The act also paves the way for the introduction of pensions dashboards which will hail a digital revolution for savers, 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.
“Getting dashboards off the ground is a monumental undertaking involving industry, government and regulators. Ensuring people can trust the information they see is accurate and complete is absolutely vital, as is protecting the system from the claws of fraudsters,” said Selby, “The decision to push back the launch of dashboards until 2023 felt sensible given the complexities involved, particularly in relation to including DB schemes and older-style pensions.”
The act will also place a new emphasis on schemes to consider the climate change impact of the investments they make on behalf of members and publish information for members on how this has been achieved.
Another clause legislates for the creation of a new style of pension scheme – Collective Defined Contributions (CDCs). Developed in cooperation with trade unions, CDCs have the potential to increase returns for millions, whilst being more sustainable for both workers and employers.
However, some industry experts argue that the schemes risk becoming an albatross around the necks of the next generation, with sons and daughters asked to make bigger contributions to pay for their parents’ pensions.
Guy Opperman, minister for pensions, 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.”