Prohibition on increasing charges etc during triggering event period

Part of Pension Schemes Bill [Lords] – in a Public Bill Committee at 12:00 pm on 9 February 2017.

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Photo of Richard Harrington Richard Harrington The Parliamentary Under-Secretary of State for Work and Pensions 12:00, 9 February 2017

Clause 34 provides for a prohibition relating to member charges during a triggering event period. Trustees must not increase charges above the level set out in the implementation strategy, introduce new charges on members or impose charges as a consequence of a member leaving or deciding to leave the scheme during a triggering period.

Regulations under clause 34 will set out how the charge levels in the implementation strategy are to be calculated. The Government intend that those levels will reflect what members paid towards the normal running of the scheme before the event happened. The charge levels will be calculated by looking back at previous charges in the scheme, and controls will be built in to protect against cases in which schemes increase charges shortly before a triggering event, so a scheme would not be able to get away with that one before the extra scrutiny.

The effect of these measures is that members will not pay any more during a triggering event period than when the scheme was operating normally. That will protect the members; even though a scheme itself is likely to incur additional costs, the money to pay them will not come from members’ pension pots. I hope that everyone will agree that that is most important. It will preserve the value of members’ rights during a triggering event.

The clause also restricts the charges that can be imposed by a master trust, proposed by trustees or employers, to receive members under the continuity option 1. Such a receiving scheme—a new scheme—will be prevented from increasing charges above the levels set out in a statement that it will give the regulator before the transfer happens, or from imposing new charges to meet the costs incurred by the transferring scheme. That means that members can join another scheme and continue to save in another pension without their pot being depleted to pay for costs incurred as a result of that happening. The clause keeps normality of charges and prevents schemes from taking advantage of a triggering event, and protect members’ pots and maintains their value.