New Pensions Act Will Better Protect Employees’ Funds against Misuse
British workers had a lot to be happy about last week thanks to the new Pension Schemes Act, which is set to better protect their life savings. It offers them protection against firms that use the pension funds for their own material benefits, disregarding the responsibility people entrust them with. The Act is already in force as of 11th Feb 2021.
What is the new Act?
The Pension Schemes Act gives regulators more power to act against firms that misuse pension funds and put other people’s pensions at unnecessary risk. Using the Act, the regulators can impose fines of up to £1 million as well as charge the guilty firms with criminal offenses. Bosses at firms that are found guilty may have to spend up to 7 years behind bars.
How does the Act protect pensions?
While the legal penalties in themselves act as a great deterrent against corruption, there are other ways with which employees’ money will be better protected after the new Act.
One of those is the change in requirements for funding of pension schemes to make them more financially sustainable. The Act requires investment managers at pension funds to consider the environmental impact of the investments they make on behalf of members. After due consideration, a report must also be presented to members so they are fully aware of how their money is being used to protect the environment.
The added demand to publish information about investments will make firms feel more answerable to members. As members receive this information, it will also encourage them to take more interest in how their money is invested. As a result, firms will always try their best to satisfy their members.
Another way to keep people interested in how their savings are being used is via pension dashboards. These dashboards will enable people to view their retirement savings on a single portal. This not only offers members ease of access to the status of their savings but also pushes them to stay involved. This move will also keep firms in check as they’ll know members will have their eyes on their savings at all times and can raise questions at any time.
Pensions Minister Guy Opperman was glad that after 12 months of challenges and struggle, the Act had finally received approval and was put in force. He called it a historic day for employees in the UK.
Claire Carey, who is a partner at Sackers, called it the most significant legislation for pensions in the last decade. She said the Pension Schemes Act will force firms to think long term and focus on their investment and funding strategies. It will help employees stay informed about their savings while forcing firms to develop a more sustainable investment approach. All this, she said, should help in eliminating corruption and scams related to pensions in the UK.