A reminder of the background
The UK Pensions Schemes Act 2021 (the Act) set out a regulatory framework for additional mandatory procedural steps to be taken in respect of specified corporate activity in circumstances where a corporate group supports a UK defined benefit pension scheme. Those additional requirements include obligations to notify the Pensions Regulator (the Regulator) and prepare a pensions impact statement (known as an ‘accompanying statement’).
The regulatory framework in the Act, however, envisages detailed regulations setting out (amongst other things) the specific corporate activity to be caught by the new obligations and the timing triggers for the notifications and accompanying statements. The Department for Work and Pensions (DWP) published a consultation on those draft regulations in October 2021. Despite original indications that the new requirements would come into force in April 2022, the final regulations have still not been laid before Parliament and there is still no confirmation from the DWP on when corporate groups will need to start complying with the new requirements.
Concerns about the regulations
As explored in our blog post from September 2021, there were significant areas of concern with the draft regulations, both in terms of how they defined the corporate events which would be caught and how they defined the timing triggers. Numerous industry bodies raised these concerns in formal responses to the consultation, which closed in October 2021.
Further delay: a reason for optimism
Since the consultation closed last year, there has been no formal update from the DWP in relation to the draft regulations. The pensions industry has been watching carefully to see when final regulations would be laid before Parliament, with the initial expectation that the regulations would come into force in April 2022. When this didn’t happen, the next likely date for the regulations to come into force would be 1 October 2022 (October being the other “usual” month for pensions regulations to take effect). However, as we are now at the end of September, there isn’t enough time for the legislation to be able to come into force at the start of October under the parliamentary convention for laying regulations before Parliament at least twenty one days before they come into effect. The only government commitment on the timing of the notifiable events regime coming into force was made by the former pensions minister, Guy Opperman, when he issued a written statement in March 2021 that the regulations would come into force “as soon as practical” after the consultation on the draft regulations closed in October 2021. The Regulator also confirmed in its 2022-2024 Corporate Plan that it is expecting to implement the new notifiable events regime in “due course”. We therefore assume that, due to the issues raised in consultation responses, the draft regulations are still being considered by the DWP and the new pensions minister Alex Burqhart, perhaps with a view to the regulations coming into force in April 2023.
Taking the time to get the regulations right would be welcomed as it is far more likely to provide effective incremental protection to defined benefit pension schemes than more speedily introducing flawed regulations which result in uncertainty for the industry and potentially the Regulator being overwhelmed by notifications as corporates seek to comply with the technical letter of the law. Ideally, the process between now and the legislation coming into force would involve:
- The DWP publishing further revised draft regulations which seek to address the concerns raised in the consultation. Given such regulations would be materially different from the draft regulations issued for consultation last year, a further period of consultation would be hugely beneficial to allow proper feedback from the industry on whether the concerns had been addressed.
- Following such consultation, DWP publishing final regulations well in advance of the current expected start date of April 2023. This would allow for further important steps to be taken to prepare for the new regime before the regulations become law.
- As a result, the Regulator being given time to prepare, and to consult on, a revised direction under the new regulations and revised guidance – both of which will play a crucial part in making the new regime workable and fit for purpose.
If you would like to discuss any issues relating to the notifiable events regulations, or the Pension Schemes Act 2021 more broadly, please get in touch with your usual Freshfields contact or any of the authors.