Legal update

Legal update: Pensions legislative changes taking effect on 1 October 2021

By Loreto Miranda and Nick Sargent, Thomson Reuters’ Practical Law Pensions service.

A number of changes to pensions legislation take effect on 1 October 2021. Most of these changes arise because provisions in the Pension Schemes Act 2021 are being brought into force on that date or regulations made under the Act are taking effect. 

Climate change-related measures include:

  • New climate risk governance and reporting requirements for trustees of large occupational pension schemes with assets worth £5 billion or more (and authorised master trusts); schemes with assets worth £1 billion or more will be affected in 2022. This includes a requirement to identify climate-related risks and opportunities that they consider will have an effect on the scheme’s investment and funding strategy. 
  • New disclosure and notification requirements on trustees who are obliged to produce a Taskforce on Climate-related Financial Disclosures (TCFD) report.
  • Trustees of occupational pension schemes within scope will also be affected by new TKU requirements relating to climate change-related risk management. 

Extended Pensions Regulator powers include:

  • New criminal offences for avoidance of an employer debt and conduct risking accrued scheme benefits. Subject to a defence of ‘reasonable excuse’, a person will be liable on conviction to a fine, imprisonment for a term of up to seven years, or both. The Regulator is expected to finalise its prosecution policy, which has been under consultation, to take effect at the same time.
  • New financial penalties allowing the Regulator to impose fines of up to £1 million in certain circumstances, including in similar situations to those giving rise to the offences of avoidance of employer debt and conduct risking accrued scheme benefits. 
  • Changes to the Pensions Regulator’s powers regarding contribution notices, primarily to introduce two new grounds for issuing such notices, relating to employer insolvency and employer resources.
  • New information-gathering and interview powers for the Regulator. These include financial penalties for providing false or misleading information either to the Regulator or to scheme trustees or managers in a range of circumstances. 
  • On notifiable events, the existing civil penalties for non-compliance will be replaced with the new financial penalty powers.

Several parts of the Act will still not be fully in force after 1 October, including the prospective changes to the funding regime for defined benefit schemes, the provisions regarding pensions dashboards and the new regime governing collective money purchase benefits.

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