Evidence of progress on DB superfund legislation - LCP

The Pensions Regulator's (TPR) activity suggests that progress on primary legislation for defined benefit (DB) superfunds could be made sooner than expected, according to LCP.

The firm noted that the regulator’s newly released Corporate Plan included a section on superfunds that referred to a legislative framework being anticipated for 2022/23.

LCP also pointed to a recently recorded interview with Work and Pensions Committee chair, Stephen Timms, and TPR CEO, Charles Counsell, during which the latter stated: “We passionately believe that we must get superfunds onto a statutory footing. The interim regime is good, but this is only as good as people engaging with it. So, putting that on a statutory footing is hugely important.”

The Department for Work and Pensions is set to respond to its own consultation on DB consolidation in the summer, with LCP pointing out that this will require the remaining differences within government to be resolved over the future direction of policy.

Additionally, the government stated in its Tax policies and consultations - Spring 2021 publication that it will be reviewing the appropriate taxation framework for DB pension superfunds, potentially a further indicator of progress.

There is currently no Act of Parliament providing a framework within which DB superfunds could operate, with TPR having published its own interim guidance for superfunds in June 2020.

LCP senior consultant, Shayala McRae, said: “It was a surprise to see the regulator set out its expectation of legislation on superfunds in 2022/23. Given the absence of a Pensions Bill in the 2021 Queen’s Speech, this is the earliest that legislation could be brought forward and is a positive sign.

“This is reinforced by the very strong language used by the CEO of the regulator when he talked of TPR being ‘passionate’ about the need for a statutory basis for superfund regulation. After a long delay it would be most welcome to see legislation in this area so that trustees and sponsors can consider superfunds as a potential destination with confidence around the regulatory environment.”

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