Overview

This bill amends the Pensions Act 2004 and the Companies Act 2006. It removes the cap on compensation from the Pension Protection Fund (PPF) and requires approval from pension scheme trustees and the Pensions Regulator before public companies can distribute dividends.

Description

The bill makes two key changes:

• Removal of PPF Compensation Cap: The bill removes the existing limit on compensation payouts from the Pension Protection Fund (PPF), which protects members' pensions when a company's pension scheme fails. This means that individuals whose pensions are protected by the PPF could receive higher compensation if their employer's scheme collapses.
• Dividend Distribution Approval: The bill introduces a requirement for public companies to obtain written approval from both the trustees of their pension schemes and the Pensions Regulator before distributing dividends. This measure aims to ensure that companies maintain sufficient funds to cover their pension liabilities before paying out dividends to shareholders.

The bill applies to England, Wales, Scotland, and Northern Ireland and will come into force six months after it is passed.

Government Spending

The removal of the compensation cap on the PPF could significantly increase government spending, though exact figures are not available in the provided bill text. The cost will depend on the number and size of future pension scheme failures.

Groups Affected

• Pension scheme members: Could benefit from higher compensation payouts in the event of a pension scheme failure (removal of PPF cap).
• Public company shareholders: May experience limitations on dividend payouts due to the requirement for trustee and regulator approval.
• Pension scheme trustees: Will have increased responsibility in approving dividend distributions of the companies whose employees' pensions they manage.
• The Pensions Regulator: Will have increased responsibilities in overseeing dividend distributions and ensuring companies have sufficient funding for pension liabilities.
• UK Government: Will potentially face increased financial burdens resulting from higher PPF payouts.

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