Ministerial Correspondence
Caxton House
Tothill Street
LONDON
SW1H 9DA		
0207 340 4000

www.gov.uk 	
	ministers@dwp.gov.uk

19 June 2020  	

			

Dear Colleagues,

PENSION SCHEMES BILL 2020 – GOVERNMENT AMENDMENTS

I am writing to provide you with some background to the Government
amendments tabled on 19 June.

The amendments cover three areas of the Bill:

•	Part 1 – Collective Money Purchase Benefits (commonly referred to as CDCs)
•	Part 4 – Pensions dashboards
•	Part 5 – Climate change risk

Part 1 – Collective Money Purchase Benefits (CDCs)

•	CDC authorisation criteria (change of Parliamentary procedure)

Clauses 11 - 17 of the Bill relate to the criteria which must be satisfied if a CDC scheme is to be granted authorisation. The regulation-making powers within these clauses will be used to set out the matters that the Regulator must take into account in deciding whether the authorisation criteria are met, as well as other matters relating to authorisation. 

The majority of the regulation making powers in these clauses are subject to the affirmative procedure on first use only. This mirrors the Parliamentary procedure for regulations setting out the authorisation framework for Master Trusts in the Pension Schemes Act 2017.

CDC schemes are entirely new schemes and the framework provided for by these clauses, which relate to their authorisation, is critical. On further consideration, the Government has decided to table the proposed amendments to clauses 11 – 17 so that the regulation-making powers currently subject to affirmative procedure on first use only will now be subject to affirmative procedure on each use.

•	Clause 47: Powers to extend definition of qualifying schemes

Clause 47 contains a Henry VIII power to extend provision of CDC benefits to master trusts and other non-connected multi-employer CDC schemes at a future point. The authorisation and supervision legislative framework may need to be altered to reflect the risks posed by such schemes and providers. Using regulations to amend the relevant primary provisions should mean that these schemes can be introduced at the earliest opportunity. 

The proposed amendments do not remove the Henry VIII power but do make it clearer when the delegated powers in this clause can be used and only for the purpose described above.

•	Schedule 3: Transfer rights (change of Parliamentary procedure)

Clause 25 contains two powers to amend the timeframes set out in primary legislation which govern when action must be taken by trustees where a transfer out of a CDC scheme has been requested. The relevant existing regulation-making powers concerning trustees’ duties after the exercise of a transfer option in the Pension Schemes Act 1993 are subject to negative resolution. It was therefore considered appropriate to make the new delegated powers in clause 25 subject to negative resolution also.

In light of the concerns that have been raised regarding the form of Parliamentary procedure chosen, the Government has proposed these amendments, which are to be made to Schedule 3, so that the exercise of the new regulation-making powers will now be subject to the affirmative procedure, rather than the negative procedure. 

Part 4 – Pensions dashboard

•	Ensuring the provision of a dashboard service by the Money and Pensions Service

The Government Response (April 2019) to the consultation on pensions dashboards, set out the Government position to facilitate the provision of multiple pension dashboards. This included a dashboard operated by the Single Financial Guidance Body, also known as the Money and Pensions Service (MaPS). 

The approach seeks to meet a diverse set of consumer needs by ensuring that individuals will have the option of using a MaPS dashboard alongside dashboard services offered by other organisations. The Government and MaPS have made multiple commitments to providing this public dashboard service. 

The proposed amendments will confirm these commitments by placing a duty on MaPS to provide a pensions dashboard service. 

The Financial Guidance and Claims Act 2018 (FGCA 2018) outlines the pension guidance function of MaPS. The proposed amendment to clause 122 of the Pension Schemes Bill 2020 further amends the FGCA 2018. It requires MaPS to provide a pensions dashboard service as part of the pension guidance function, and makes provision for information from occupational and personal pensions schemes to be provided to the consumer or a person authorised on their behalf. It also enables MaPS to extend the pensions dashboard service to state pension information. 

Part 5 – Climate change risk

•	Climate governance and disclosure: Paris Agreement

During the Bill’s Committee Stage, the Government introduced amendments to take powers to mandate effective oversight and disclosures by occupational pension schemes in relation to climate change risk. The immediate focus was on disclosures in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) but did include the power to place other reporting requirements on trustees and managers of pension schemes, including in relation to the Paris Agreement through an assessment of their assets’ contribution to climate change.

These new amendments make it explicit that the powers may be used to require that scheme trustees and managers take into account the different ways in which the climate might change, including a scenario where the Paris Agreement goal of holding the increase in the average global temperature to well below 2oC above pre-industrial levels, is achieved.

During the debate in Committee, I made it clear that the Government recognises that consensus on methodologies for assessing contributions to climate change do not currently exist. I reiterate here that the Government intends to consult fully on all requirements following completion of the Bill’s passage through Parliament. 

I also want to be clear that these powers will allow the Government to ensure effective governance and disclosure of risk; they do not allow the Government to direct pension schemes to invest in a certain way or to be Paris-aligned – it is not for the Government to make these decisions for trustees.

I hope this letter is helpful and will place a copy in the House Library.
If you would like any further information on these amendments or on the
Pension Schemes Bill more broadly, please contact the Bill team, by email in
the first instance at
CAXTONHOUSE.PENSIONSBILL2019@DWP.GSI.GOV.UK 
or by phoning Mike Jewell on 020 7449 5264.

With best wishes

BARONESS STEDMAN-SCOTT
MINISTER FOR WORK AND PENSIONS (LORDS)