Royal Assent given for Pension Schemes Act

The Pension Schemes Act received Royal Assent yesterday (29 April) and is now law, following the Pension Schemes Bill completing its passage through Parliament on 28 April.

Pensions Minister Torsten Bell said: “Today is a landmark moment for the 22 million workers building up a pension pot across the UK. For too long, our pensions system has been fragmented and rarely ensures that people’s savings are working hard enough to support them in retirement. The Pensions Schemes Act will change that by creating schemes that drive down costs, deliver high returns and give savers the security they deserve.”

The Department for Work and Pensions (DWP) has estimated that the new law will boost the average worker’s pension pot by up to £29,000 by the time they retire, through better investment performance, lower costs and investing for longer. Defined Contribution (DC) schemes will have to prove they are delivering Value for Money through a standardised assessment framework, including the requirement to offer clear default options for retirement.

The Act also paves the way for multi-employer DC ‘megafunds’ of at least £25 billion, which the DWP has said will drive down costs and enable investment in a wider range of assets including UK businesses and infrastructure. Following House of Lords scrutiny and industry feedback, the government’s power to influence how pension schemes invest has been narrowed and is subject to additional safeguards.

Defined Benefit schemes will have greater flexibility to unlock surplus funds, which is estimated to release around £160 billion to deliver for scheme members and support employers.

The Act also includes a legislative solution to issues arising from the Virgin Media section 37 actuarial confirmation requirements for certain historic rule changes made while schemes were contracted out. It provides a route for schemes to obtain retrospective actuarial confirmation, where appropriate, to validate potentially affected amendments and reduce uncertainty over benefit liabilities.

Helen Chivers, Actuarial Team Leader at HPW, says: “It’s great to see the Pension Schemes Act receive Royal Assent and become law. The Act provides welcome momentum on key pensions reforms, and we now look forward to the detail in the secondary legislation and regulatory guidance so trustees and sponsoring employers can understand what this means in practice.”