- Punitive fines - introducing an express power to issue a punitive fine in addition to the required funding contributions where the employer has deliberately and unlawfully attempted to avoid its obligations to a DB scheme.
- Criminal sanctions - legislating to introduce a criminal offence where directors have behaved in a wilful or grossly reckless manner in relation to a DB scheme and building on the existing powers to disqualify those whose behaviour falls short of the expectations of the role.
- Notifiable events and clearance - certain events occurring in relation to a DB scheme must be notified to TPR and pre-approval of some proposed corporate transactions is sought voluntarily by way clearance. The DWP intends to strengthen the notification and clearance regime. Currently, TPR must be informed “as soon as reasonably practicable” where corporate activity could have a detrimental effect on a DB scheme. Consideration will be given to whether TPR should be alerted earlier and in a wider range of cases. An earlier proposal for a mandatory clearance requirement is not being pursued.
- Information-gathering – the pensions regulator’s existing powers across auto-enrolment, master trusts, DC and DB arrangements are to be harmonised to increase effectiveness.
The intention is to improve significantly TPR's ability to act quickly and to deter against irresponsible employers putting their schemes at risk.
Improving scheme funding standards
There is a legal requirement for DB schemes to aim to hold sufficient assets to provide members’ benefits – the scheme funding regime.
The government believes there is no general affordability problem across DB schemes as a whole, but it thinks clearer scheme funding standards would be beneficial.
Proposals for change include publication by TPR of a revised, enforceable DB funding code of practice and encouraging trustee-employer collaboration on a long-term funding strategy.
A new requirement is also to be introduced for the scheme’s trustee body to appoint a chairman who will produce a statement every three years, along with the scheme’s actuarial funding valuation.
The chairman's statement is intended to improve accountability to members and to demonstrate collaborative decision-making between the trustee and the sponsoring employer.
It would explain the long-term financial destination and a scheme’s strategic funding plan. Members would be actively encouraged to engage with the scheme to improve their understanding of its funding.
Consultation on new forms of consolidation vehicles
There are already several options for DB schemes to benefit from consolidated functions, such as shared administration services, asset pooling, fiduciary management and master trust arrangements.