The Pensions Regulator has imposed its first fines against mastertrusts for failing to complete a chair’s statement, as it signals a hard approach to dealing with defined contribution administration lapses.
Mastertrust regulation is an area of increasing focus for the regulator, following the additional powers it was granted in the pensions bill last year.
Fines have previously been issued elsewhere for failing to complete a chair’s statement; last year professional trustee company PTL paid fines totalling £6,000 following breaches on three schemes it acted as trustee for.
The regulator also issued £5,020.70 in fines to two trustee companies representing four mastertrusts.
Submitting a chair’s statement is a legal requirement that came into force on April 6 2015.
It shows the direction of travel, showing the regulator has bite as well as bark
Anne-Marie Winton, Arc Pensions Law
A £2,000 fine – the maximum possible – was issued to professional trustee company MC Trustees, which chairs the Nurture Mastertrust, while fines totalling £3020.70 were imposed on Countrywide Assured Trustee Services for three breaches related to three mastertrusts referred to as the 'Save and Prosper Funds' in the regulatory intervention report.
None of the fines were contested and all were paid in full.
Countrywide declined to comment, while MC Trustees did not respond to repeated requests for comment.
The regulator's report states: “We issued the maximum fine amount allowed by statute on MC Trustees Ltd because it is a professional trustee and there were no mitigating factors which would reduce the amount of the fine.”
Administration crackdown
A spokesperson for the regulator said that while not submitting a chair’s statement results in a mandatory fine, they were also cracking down on instances of scheme returns not being filed.
The spokesperson said: “Submitting a scheme return is a legal requirement but it’s not a mandatory fine, so there are obvious steps we can take to support trustees to comply with this and have some discretion, therefore we are choosing to fine trustees in this case if they still fail to complete after our support.”
Anne-Marie Winton, partner at law firm Arc Pensions Law, said this approach is indicative of the more proactive approach outlined in the Work and Pension Select Committee’s recent report on defined benefit pension schemes. The approach also chimes with the increased powers the regulator has been granted to regulate mastertrusts.
Winton said: “It shows the direction of travel, showing the regulator has bite as well as bark. The second select committee report has given indications of how the regulator ought to behave and has given the example of some very heavy fines.”
Regulator announces mastertrust crackdown
The Pensions Regulator has announced plans to crack down on poorly governed mastertrusts, as auto-enrolment begins to show clear winners and losers among schemes.
DB-DC discrepancy
Matthew Giles, partner at law firm Squire Patton Boggs, pointed out that differences in the rules for DB and DC schemes providing a chair’s statement could lead to confusion among schemes.
“The obligation for the chair’s statement is only for DC,” he said. “One of the risks here is a scheme thinks of itself as a DB arrangement and not subject to the requirements, and then commits a breach because it doesn’t realise,” he explained, giving the example of a DB scheme with a DC section.
Giles added that while the fine for failing to complete a chair’s statement is mandatory, it ranges between £500 and £2,000, whereas the fine for failing to complete a scheme return can run up to £5,000 for individuals and £50,000 for companies.
