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Pension Schemes Bill passes latest stage Posted On 16 October 2020

“The role of bricks and mortar in later life is changing”, says the Chairman of the Equity Release Council, as hopes of housing wealth being included in the pensions dashboard improve!

 

At its second reading last Wednesday, The Pension Schemes Bill has been passed in the House of Commons after some debate between MPs.

The third reading in the House of Commons will be its last, offering final opportunities for MPs to suggest any amendments to the bill. It will then return to the House of Lords for final consideration.

The bill largely focusses on climate change, changes to The Pension Regulator’s powers, regulation around the pension dashboard, new-style collective defined contribution schemes, and changes to defined benefit scheme regulation. It proposes to grant the UK Pensions Regulator (tPR) a new range of enforcement powers, the key ones of which being proposed are:

  • Criminal sanctions for: (i) avoiding an employer debt; (ii) risking accrued scheme benefits; and (iii) failing to pay a contribution notice. In each case, there is a reasonable excuses defence.
  • Extension of the notifiable events regime. An increased number of people, including anyone connected or associated with an employer, must make a notification to tPR and prepare a detailed statement of intent setting out the impact of the notifiable event.
  • New grounds for contribution notices where: (i) the scheme is in deficit immediately before a transaction and that transaction materially reduces the amount recoverable by the scheme; and (ii) an act or omission which materially reduces the resources of an employer in comparison to a hypothetical employer debt at that time.

The Pension Schemes Bill started in late January of this year in the House of Lords and was firmly welcomed by peers, with Lord Hutton of Furness stating the bill reinforces the “existing safeguards protecting DB pension schemes”.

This is what Chairman of the Equity Release Council, David Burrowes, had to say: “The UK has an ageing population who are living longer into retirement. Therefore a tool which enables people to better understand how to fund these years is increasingly necessary.

“Pension dashboards should include all accumulated assets, savings and investments together with pensions to allow people to have an holistic view of how to fund, and make more informed decisions, about their retirement.

“For example, housing wealth is often a home-owners largest asset exceeding the value of an average pension. 40p in every £1 of over-65-year olds’ wealth is being invested in property, while 51% of homeowners aged 45 years and over see their housing wealth as part of their later life financial plans, but property has not been included in current plans. The role of bricks and mortar in later life is changing.

“During the debate on the Pensions Scheme’s Bill, this view was reiterated by various peers who argued equity release is becoming an increasingly important part of retirement planning.

“Lord Young of Cookham and Lord Flight both advocated for the inclusion of housing wealth in the pensions dashboards to ensure they will be broad enough to be truly valuable to consumers.”

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