Employers be aware – big changes to the defined benefit pensions landscape come into force

Some of the biggest changes to the defined benefit pensions landscape in recent years come into force on 1 October 2021. Much has already been made of the provisions of the Pension Schemes Act 2021. Here is a rundown of what comes into force on 1 October (note that these provisions do not have retrospective effect):

  • Getting money into schemes – the Pensions Regulator gains two new grounds on which to issue a contribution notice – the employer resources test and the employer insolvency test. Contribution notices can be issued to an employer in relation to a defined benefit pension scheme, or to a "connected" or "associated" person. For further information on these new grounds, see Blog: contribution notices
  • Three new criminal offences –  carrying the possibility of imprisonment for up to seven years, and/or an unlimited fine. The new offences are: failing to comply with a contribution notice, avoidance of an employer debt, and conduct risking accrued scheme benefits. For further information on these new offences, see Blog: criminal offences
  • Financial civil penalties of up to £1 million,  which can be levied by the Regulator for:
    • Avoidance of an employer debt;
    • Conduct risking accrued scheme benefits;
    • Failure to comply with a contribution notice;
    • Failure to comply with the notifiable events regime;
    • Provision of false or misleading information to the Regulator or trustees.
  • Enhanced investigative powers for the Regulator and escalating financial sanctions for failure to comply.
  • What's not coming into force (yet) is the requirement for employers with defined benefit pension schemes who are undertaking certain corporate transactions, to provide a "declaration of intent" to the Regulator or trustees. This is not expected to come into force until April 2022.

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.