New Regulator powers will impact corporate activity in 2021
At a glance
The Pension Schemes Act 2021 has now been passed into law and contains changes in a number of areas, including changes to The Pensions Regulator's powers
These will affect a wide range of corporate activity, from transactions to everyday governance
The changes include new company events that need to be notified, with some requiring an accompanying statement on the impact of the event, and new grounds for The Pensions Regulator to impose funding obligations
There will also be new civil and criminal offences, including potential personal consequences for directors
The new powers and sanctions are expected to be in force from Autumn 2021, so employers will need to reflect the rules in any corporate activity that may still be ongoing this Autumn
New obligations and powers
New Regulator sanctions
Actions employers can take
1. Understand your pension scheme’s creditor position and how corporate activities could affect it
2. Consider the impact of the new powers on your directors’ responsibilities and any protections in place
3. Design a process to identify activity captured by the new notification rules and include pensions in ongoing governance checks
4. Ahead of any corporate activity, plan engagement with the scheme ahead of the activity taking place and record the treatment of the scheme formally
If an employer is considering corporate activity in Spring 2021, it may well still be ongoing in Autumn 2021.
Employers will want to ensure that their engagement with pension schemes in relation to corporate activity over 2021 reflects the new rules.
New moral hazard powers
There will be two new grounds for the Pensions Regulator to issue a Contribution Notice. These could capture a wider range of corporate situations – potentially not just M&A activity, refinancing or restructuring, but also more day-to-day risk management matters.
Employers should document their consideration of events and their conclusions in order to protect against their action (or inaction) being later viewed as grounds for a Contribution Notice.