Overview

This bill amends the Pensions Act 2004 and the Companies Act 2006. It removes the cap on compensation paid by the Pension Protection Fund (PPF) to members of failed pension schemes and introduces a requirement for pension scheme trustees and the Pensions Regulator to approve company dividend distributions.

Description

This bill makes two key changes:

• Removal of the PPF Compensation Cap: The bill removes the existing limit on the amount of compensation the PPF can pay to members of pension schemes that have become insolvent. This means that members of failed schemes could receive higher compensation than previously possible.
• Dividend Distribution Approval: The bill mandates that public companies must obtain written approval from both their pension scheme trustees and the Pensions Regulator before distributing dividends. This aims to ensure sufficient funds remain within the company to secure pension scheme liabilities.

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 PPF compensation cap will likely increase the amount the PPF needs to pay out. The exact cost is uncertain and will depend on future failures of pension schemes, but it could potentially lead to a significant increase in government expenditure as the PPF is ultimately backed by the government. No specific figures are provided in the bill text.

Groups Affected

The bill will affect several groups:

• Pension Scheme Members: Members of failed pension schemes could receive higher compensation if the scheme is covered by the PPF.
• Pension Scheme Trustees: Trustees will have a more significant role in overseeing company dividend distributions, potentially increasing their responsibilities and liabilities.
• Public Companies: Public companies will face increased scrutiny and procedural requirements before distributing dividends.
• The Pensions Regulator: The Regulator's role expands, requiring involvement in the approval of dividend distributions, increasing its workload and responsibilities.
• UK Government: The government, as the ultimate guarantor of the PPF, may face increased financial burdens due to higher compensation payouts.

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