The Pensions Regulator has published its new enforcement policy, which contains new powers awarded in the Pension Schemes Act 2021, and replaces and consolidates compliance and enforcement policies governing defined benefit, defined contribution and public sector pension schemes.
Amid a raft of announcements, TPR also published responses to a consultation issued after the PSA 2021, which came into force in order to provide clarity on how the watchdog intends to use its new powers.
“Feedback from stakeholders also highlighted a need to be more transparent with our regulated community about what to expect when they are the subject of our enforcement action,” TPR director of enforcement Erica Carroll wrote in an accompanying blog.
The regulator has also updated its prosecution policy to reflect new criminal powers contained within the PSA 2021.
Feedback highlighted a need to be more transparent with our regulated community about what to expect when they are the subject of our enforcement action
Erica Carroll, TPR
‘Not a fundamental change in our approach’
The watchdog has been armed with new powers in successive rounds of legislation since the Pensions Act 2004. TPR was set up in April 2005, replacing the Occupational Pensions Regulatory Authority.
“While our new strategy, and these policies, are not a fundamental change in our approach, they give a clearer understanding of the enforcement journey and factors we will take into account throughout the life of a case,” Carroll wrote.
TPR set out its range of enforcement powers, which are divided into regulatory, penalty, civil and criminal powers. These are largely discretionary, although mandatory penalties do exist, including a maximum £2,000 fine for failing to prepare a chair’s statement.
The watchdog also explained its approach to investigations.
“Generally, we expect to engage with a scheme, trustee, employer or any other person(s) potentially facing enforcement action to set out our concerns before we start a formal investigation,” it said.
“Our aim in most cases is to resolve or mitigate any risks without the need for enforcement action, but where this is not achieved we may open an investigation.”
Failure to comply with TPR’s information gathering can result in fixed penalty notices and escalating penalty notices.
Individuals aside, the daily rate of an escalating penalty reaches £10,000 by the 20th day of non-compliance, remaining at this rate for every subsequent day of failure to comply with the regulator.
TPR may decide to settle on enforcement action – or not
TPR described its intended, positive enforcement outcomes as one or more of prevention, remedy, restoration and deterrence.
“Where appropriate, we may decide to settle part or all of our enforcement action where we have that option, and it will achieve one or more of the above outcomes,” it said.
“We may, however, choose to depart from the settlement policy if we consider it appropriate, and the decision whether to settle ultimately rests with us. Our policy expressly excludes criminal cases as we cannot settle criminal proceedings out of court as a matter of law.”
Where prevention is TPR’s preferred outcome, the watchdog may issue an improvement notice or a third-party notice, it said. These notices can be used to set out the steps an individual must take — or refrain from taking — in order to remedy their breach, and also to prevent the breach from being repeated.
“We are unlikely to take this kind of action in cases involving scams or misappropriation of scheme assets,” it continued, noting that it takes the loss of pension savings resulting from the actions or inactions of trustees especially seriously.
“In these cases, we intervene to freeze and secure assets and disrupt the activities of those who prey on members.
“If appropriate, we will take action to suspend or prohibit those involved from acting as trustees and appoint an independent trustee to the scheme.”
In the case of remedy, TPR may issue an improvement notice or a financial penalty, or a combination of both.
The restoration of missing contributions, meanwhile, would see an employer receiving a notice ordering the repayment of these contributions, while penalty or criminal powers may be used in response to an employer’s conduct with regards to a notice.
TPR will act ‘reasonably and pragmatically’
The regulator received 13 consultation responses from a range of advisory companies and industry bodies.
Respondents told the watchdog that it should provide “more information and guidance to the targets of our enforcement action about the scope of our powers, the issues of legal privilege, and self-incrimination and confidentiality”.
TPR replied that recipients of information requests will usually know if they are targets, as the regulator will have contacted them.
It also amended its policy to clarify that it would not usually expect to take action against trustees of transferring schemes in instances of pension scams, after consultation respondents noted the possibility of this taking place.
TPR to prosecute former trustees over ‘illegal’ pension loans
Two former trustees will appear before court as part of a prosecution brought by the Pensions Regulator over allegations that the pair made illegal loans and investments.
Respondents also noted that there is likely to be “a larger number of pension disputes in future because of the McCloud remedy and this could put undue pressure on public service schemes, particularly if asked to respond to multiple information requests”.
TPR said that it would act “reasonably and pragmatically” should subjects say that they are having difficulties with complying with the watchdog.
It said that it would not revisit its financial penalties, however, after respondents observed that corporate trustees or trustees of multi-employer schemes would face difficulties accessing indemnity or other funds within the 28-day time limit.
