Proposals to change the legal requirements for notifying corporate activity to the UK Pensions Regulator (the Regulator) have been “out there” for a long time, but with no clarity on when or how those proposals would be progressed. This blog provides a brief update.
A reminder of the background
The UK Pension Schemes Act 2021 (the Act) sets 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 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 a draft version of the regulations in September 2021. Since the consultation closed in October 2021, there has been no consultation response and no formal update from the DWP in relation to the draft regulations.
Despite original indications that the new requirements would come into force in April 2022 followed by some speculation that they would come into force in October 2022 or April 2023 (April and October being the ‘usual’ months for pensions regulations to take effect), the final regulations have still not been laid before Parliament. There was also no specific mention in the Regulator’s 2023-24 corporate plan as to when the new notifiable events regime is expected to come into force, despite more recent confirmation from the Regulator that it remains interested in corporate transactions even with improved scheme funding positions. The Regulator has recently stated that the fact that the majority of schemes are now in surplus may mean that businesses are more attractive to transactional activity (and in those scenarios, early engagement from corporates with both pension scheme trustees and the Regulator is key to ensuring a successful outcome).
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.
While uncertainty is rarely helpful, the significant delay has been welcomed by some who hope that the DWP is taking the time to get the regulations right. As set out in our blog post from September 2022, an ideal scenario would involve the DWP publishing revised draft regulations and allowing for a further period of consultation before final regulations are published well in advance of the expected implementation date, with the Regulator being given time to prepare and consult on a revised direction under the new regulations and revised guidance – both of which could play a crucial part in making any new regime fit for purpose.
An update on timing
The DWP has now provided confirmation to the Association of Pension Lawyers that, considering their priorities over the next six months, whilst they continue to make progress with the regulations and intend to lay them before Parliament in due course, it is very unlikely that they will come into effect in April 2024. They have also confirmed that it is very unlikely that the regulations would come into force ‘out of cycle’, meaning that they would be expected to come into force either in April or October in any given year.
In the meantime, the Regulator has confirmed that, although it will continue to monitor market activity and proactively engage where it thinks there could be a risk to pension savers, it would expect pension scheme trustees to reach out and keep the Regulator updated as details of transactions emerge.
If you would like to discuss any issues relating to the notifiable events regime, or the Pension Schemes Act 2021 more broadly, please get in touch with your usual Freshfields contact or any of the authors.
