Introduced at a sedate pace after the Maxwell affair in 1991 and the subsequent Goode Committee, the Act's massive 181 sections make it one of the most formidable pieces of legislation of the decade. It is designed to put pensions on a more secure and equal footing.
This new legislation will affect the retirement income of more than 11 million pension scheme members. One of the most significant aspects of the Act is the introduction of controls for funding pension schemes, to ensure that pension promises are backed by adequate funds. It requires auditors and actuaries to "blow the whistle" if they believe something is wrong. The Act also established sex equality in pensions which came into effect on 1 January 1996.
Pension scheme trustees are the lynchpin of the new regime. For the first time member trustees must be represented on most pension trustee boards. Additionally the Pensions Act creates a regulator with wide powers and sanctions, the Occupational Pensions Regulatory Authority (Opra). It provides for a compensation scheme which will protect members against the dishonest removal of assets, should the employer be insolvent.
The new Act is not without its critics.The Pensions Act has virtually no sections designed to protect funds against fraud. The only exception is the post-event compensation levy which Richard Malone, president of the Pensions Management Institute, says is restricted.
He forecasts: "When the first schemes go under and cannot meet their obligations, despite complying with the new funding rules and when the limitations of the compensation scheme become apparent, there will be outrage and discontent."
Who has custody of the assets of a pension fund? Are internal controls tough enough? The Act does not specify standards in these vital areas. Indeed it does not prevent the investment of the fund in a single property development or buying large numbers of shares in unlisted Lichtenstein companies. Tom Ross, chairman of the National Association of Pension Funds, warns: "[The Act] will not stop a major theft taking place."
Ken Trench OBE, former chairman of the Maxwell Pensioners Action Group, adds: "Even when the pension scheme isperfectly run, if its investment managers have an experience like Maxwell or Leeson, then however perfect pensions regulation is, the City system could let it down."
Yet the fear is that the Pensions Act will be like another Financial Services Act, vastly increasing compliance costs but still allowing villains to surface.
The Department of Social Security provides useful booklets on the Pensions Act 1995, available free from the DSS Pensions Info-Line on 0345 313233.
Stephanie Hawthorne is editor of "Pensions World", the monthly magazine for pensions experts