New Pensions Bill announced in the Queen's Speech
The Queen's Speech on 18 May announced further changes which will affect the future governance of money purchase schemes. Some of the detail regarding what we can expect the new Pensions Bill to cover was included in the background briefing notes that accompanied the Queen's Speech.
There are 3 areas of focus:
- Stronger regulation of Master Trusts – partly in response to concerns expressed by the Work and Pensions Select Committee, the Government proposes to specify "strict new criteria" that such arrangements will have to meet, and to give greater powers to the Pensions Regulator so that it can supervise them and take action where it is needed.
- Capping early exit charges – the Government proposes to impose a cap on early exit fees charged by some trust based occupational pension schemes and to create "a system that enables consumers to access pension freedoms without unreasonable barriers."
- Restructuring financial guidance – There are two proposed reforms for the delivery of financial guidance to consumers. Firstly, the Pensions Advisory Service, Pension Wise and the pensions services currently offered by the Money Advice Service will be merged, with the aim that the new organisation will be able to provide "access to a straightforward private pensions guidance service for customers". Secondly, a new money guidance body will replace the Money Advice Service and be charged with "identifying gaps in the financial guidance market to make sure consumers can access high quality debt and money guidance".
The restructuring of financial guidance is likely to be the biggest challenge for the Government. Individuals will be faced with potentially complex choices and enabling them to take well-informed decisions will always be a major challenge. Providers and potentially employers could be exposed to criticism if the information made available to individuals is later judged to be inadequate or unclear.
Most of the focus of the proposals announced in the Queen's Speech is on money purchase schemes and steps to protect members and improve governance. However, the Pensions Bill is likely to be subject to change as it makes it way through Parliament and further changes may be incorporated to address some of the specific problems arising from defined benefit scheme regulation. This follows the announcement made on 31 May that the Work and Pensions Committee will be launching a “major inquiry” into defined benefit pension schemes. This follows the high profile collapse of high street retailer BHS and the inquiry into its pension scheme, and the threat to the British Steel Pension Scheme as Tata Steel put its UK business up for sale.