|At a recent webinar from LCP & Arc Pensions Law discussing The Pensions Regulator’s new powers contained in the Pensions Schemes Act 2021, we asked a question
‘based on what we’ve heard, who expects MNT’s to stay on or new ones be appointed’?
This question is raised in light of the new criminal offences and financial penalties contained within the Act. Large sections of the Act will not come into force for many months and there is still much to be resolved. Most of this will be through secondary legislation, Codes of Practice and TPR guidance. Equally, we are not going to talk about the changes to the funding regime, fast track and bespoke valuations as this is still out for further consultation. Put another way, we know that things are going to change, but we don’t as yet know exactly what and how. For most us who make a living out of pensions, no change there then.
We don’t intend to go into the detail of the potential criminal offences which the Act contains which carry some stiff sentences (although interestingly the jail term of 7 years is less than for lying about your travel arrangements when entering the UK) mainly because as criminal offences they need to be approved beyond all reasonable doubt and this is a high bar to be judged by. What, in our opinion, the Act does do is put another obstacle in the way of individuals who, for a variety of reasons, are already or want to become trustees.
The declaration of intent requirements are much wider than the current notifiable events regime. The stronger powers granted to TPR include that an ‘appropriate person’ is required to notify TPR;
Of certain prescribed events
Of any material change in, or in the expected effects of, the relevant event and
If the relevant event is not going to, or does not, take place
The list of prescribed events is to be detailed in regulations, but is expected to include a number of corporate events such as the sale of a controlling interest in the employer, the sale of the employers business or assets and the granting of security which has a higher priority than the pension scheme debt. The appropriate person is equally widely defined including directors and staff at the employer, advisers and other third parties.
As professional trustees it’s not our job to spook other members of our trustee boards, indeed it’s the exact opposite of that. There are however some important points arising from all this. Conflicts of interest have always been with us. Indeed, some have argued that professional trustees being Company appointed are as conflicted as other Company appointed trustees. We believe that whilst we can walk away if the situation becomes untenable it’s a lot harder to do so if your monthly salary stops and you are among the c3m without work at this time.
As always, the question of when remaining a trustee and a company employee is a personal one, based on the unique circumstances of the situation. That said, the Act does not help when many pension schemes are struggling to find suitable candidates to act as trustees.
Given the choice of becoming a trustee or not, the risks are beginning to pile up for lay trustees . Whilst as professional trustees, (and we would say this wouldn’t we!) we support the general move to more professional behaviour of trustee boards, losing the experience of trustees who often know the employer, the history and the industry sector they operate in does, in our view, weaken the trustee board.
We hope that we are wrong, though somehow we doubt it.
Henry, I fully endorse Michael’s comments.
As a pensions professional I have been asked on many occasions to become a Company appointed trustee for struggling DB schemes. On each occasion I have turned the opportunity down on the basis of potential conflicts arising plus as a very experienced pensions professional I would personally carry the can when the scheme inevitably got into a sticky situation.
However the passing of the PSA21 now raises the stakes even higher. I would go further to say that the Act will actually speed up not only the demise of volunteers to become Trustees, but once Company Boards become aware of the potential for criminal sanctions, Company Secretaries and Finance Directors in particular will take steps to remove themselves out of the firing line by closing down their remnants of DB schemes as rapidly as possible. As the buyout route is currently grossly expensive due to the effects of QE, (and with Covid bills to pay I can only see more QE around the corner) there will be a rush to move those schemes off the balance sheet to the superfunds once TPR gives them the long awaited official “Green Light”.
When the !995 Pensions Act was passed I predicted a long slow death for DB Schemes, now I predict the 2021 Pension Schemes Act will be the final nail finishing the job before the end of this decade.
It is not all gloom and doom however, as the PSA 21 does lay the foundations for a resurgence of efficient quality pension provision by the use of Collective DC schemes, and in years to come Master Trust CDC.