DB White Paper: TPR’s new powers are significant, but impact dependent on next steps, says Sackers
Sackers has responded to the Department of Work and Pensions’ White Paper, ‘Protecting Defined Benefit Pension Schemes’.
Janet Brown, Partner at Sackers, commented: “Like the trailer of a Hollywood blockbuster, the paper trails key ideas under consideration and the phased approach to the various consultations it promises will follow with the necessary detail.
“The main message is that TPR is up front and centre in being given more powers to strengthen the existing pensions system for the first time since its creation in 2005.
“While a new Pensions Act is not foreseen until 2019/2020, the main proposals in the White Paper include some pretty meaty changes to TPR’s powers to get information, insist on interviews, and inspections and it will have the ability to issue civil fines. Alongside this is the political manifesto commitment of the Government to introduce criminal sanctions for those limited, serious cases where directors are said to have shown wilful or grossly reckless behaviour in relation to a DB scheme. Time will tell how easy “recklessness” will be to draft and implement.
“Despite all the rumours about fundamental changes to the system, the proposals map out, with a liberal use of the word “proportionate”, improvements to the current system including:
- Clarification to the DB Code of Practice on funding standards with a new revised Code to be consulted on later in 2018;
- A requirement (perhaps not a surprise) that DB Chairs follow their DC colleagues in needing to have a DB Chair’s statement which will be submitted to TPR with the triennial valuation;
- TPR is to focus its efforts on financially vulnerable schemes where there has been a hit on key metrics;
- RAAs will be extended and will have their own consultation;
- Consolidation of schemes will be enabled – the DWP states this consultation will materialise towards the end of 2018.
Brown continued: “While you might think there is something for everyone, those waiting for an RPI/CPI statutory override power will be disappointed, with the DWP not wishing to commit at this time to introducing that power. No change either to the current debt on the employer legislation nor the introduction of a shortened valuation cycle.
“Overall, whilst these changes represent the most significant overhaul since TPR came into being, the likely impact of the new powers will be highly dependent on the clarity with which they are drafted, TPR’s resources and its appetite to use them.
“The roll-out of the follow on consultation papers over the coming year will keep the industry busy, working out the detail of how these ideas will come to fruition.”