New powers for The Pensions Regulator (TPR)

7th February, 2022

  • Trustees should already be aware of TPR’s new and extended powers under the Pension Schemes Act 2021. They have been well publicised and, with one notable exception (notifiable events / declarations of intent – see below), they largely came into force in October 2021.

    Awareness of these changes may not, however, be enough.

    At first blush, they may appear to be mainly matters for employers to be concerned about and, indeed, they should be. Nevertheless, because of the potential reach of the new regime and severity of sanctions that could be imposed, there are a number of actions that trustees should be considering.

    Before turning to what these actions might be, a quick reminder of what is happening (for a bit more detail on the changes, see table at the end of this article).

    • TPR information gathering powers. The changes are to harmonise and extend TPR’s powers so that:
      • it can interview a person it believes has relevant information in connection with any of its functions without the need for a written request for information to have already been issued under section 72 of the Pensions Act 2004;
      • it can enter a wider range of premises where relevant records or information are held, for the purposes of inspection; and
      • it can issue civil penalties for non-compliance with section 72 notices, interview or inspection requests where more appropriate than a criminal prosecution.
    • Contribution Notice (CN) powers. The aim is to clarify and strengthen the existing legislation to ensure that TPR’s CN powers are up to date and fit for the future. In practice, it materially broadens the first base tests.
    • Sanctions and fines. This measure seeks to deter occupational pension scheme sponsoring employers or scheme trustees from engaging in wrongdoing in relation to their pension scheme. This is done by:
      • extending the list of duties and requirements which attract a civil sanction;
      • introducing a new £1 million civil penalty to appropriately address more serious breaches;
      • introducing new criminal offences for wilful or reckless behaviour in relation to a pension scheme or failure to comply with a CN.
    • Declarations of Intent (expected to come into force in April 2022). This measure seeks to reduce risks to defined benefit pension schemes and enable trustees and TPR to take action, where necessary, to protect the pension scheme. It will do so by making changes to the Notifiable Events regime and introducing a requirement for transaction planners to make a Declaration of Intent which would be issued to TPR and shared with trustees, setting out information about the transactions and how any detriment to the pension scheme is to be mitigated.

    Against this backdrop of criminal sanctions and civil penalties of up to £1 million, there are a number of actions that trustees can take.

    Actions for trustees:

    • Understand the new powers and sanctions.
    • Be aware of the new notifiable events regime and requirements for Declarations of Intent.
    • Review trustee insurance policies and any employer indemnities, and consider whether they offer sufficient cover.
    • Be ready for employers to be more likely to seek clearance for future transactions and more trustee involvement.
    • Update risk registers.
    • Consider whether any actions being contemplated might constitute conduct that would risk accrued scheme benefits.
    • Consider whether any inaction might constitute such conduct.
    • Make consideration of proposed actions through this lens a standing item on agendas for trustee meetings.
    • Ensure administrators and other service providers have knowledge and understanding of the new civil penalties and criminal sanctions.
    • Look out for TPR guidance.

    Table – TPR new powers

    Criminal Offence

    Offence

    Target

    Avoidance of employer debt

    Criminal offence: up to 7 years imprisonment and/or unlimited fine

    Any Person

    Conduct risking accrued scheme benefits

    Criminal offence: up to 7 years imprisonment and/or unlimited fine

    Any Person

    Failure to comply with a Contribution Notice

    Criminal offence: Unlimited fine

    Sponsoring employers and others associated or connected

    Financial Penalty

    Penalty

    Target

    Avoidance of employer debt

    New civil penalty: up to a maximum of £1 million

    Any Person

    Conduct risking accrued scheme benefits

    New civil penalty: up to a maximum of £1 million

    Any Person

     

    Failure to comply with a Contribution Notice

    New civil penalty: up to a maximum of £1 million

    Sponsoring employers and others associated or connected

    Failure to comply with the notifiable events framework

    New civil penalty: up to a maximum of £1 million

    Sponsoring employers and trustees

    Failure to comply with the requirements for a Declaration of Intent

     

    New civil penalty: up to a maximum of £1 million

     

    Sponsoring employers and others associated or connected

     

    Knowingly or recklessly providing false information to TPR

    New civil penalty: up to a maximum of £1 million

    Please note: A criminal offence already exists for this offence

    Any person who is required to provide information to TPR, as per the legislation

    Knowingly or recklessly providing false information or failing to

    New civil penalty: up to a maximum of £1 million

     

    Any person who is required to provide information to Trustees, as per the legislation.

    Source : PSA2021 impact assessment

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    • Published byJohn Wilson

      John is Head of Technical, Research and Policy with over 33 years’ experience in employee benefits knowledge management He joined Dalriada in December 2019. Previously he was Head of Technical at JLT Employee Benefits for 20 years and pensions technical roles at...

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