The Pensions Regulator

FAQs

Frequently asked questions – answers your questions about the Pensions Regulator, what we do and the way we work.

The Pensions Regulator replaces the Occupational Pensions Regulatory Authority (Opra) as the regulator of work-based pensions in the UK.
It was established under the Pensions Act 2004.
It came into force on 6 April 2005.

A Government Green Paper on pensions was published in December 2002 setting out the need for pensions reform.
Opra's powers were limited by the Pensions Act 1995. It could take action in response to reported problems with pension schemes, but it did not have the power to order schemes to put things right or intervene proactively.
It was decided that a more proactive, risk-based and flexible approach was required to regulate work-based pension schemes.
As a result, the Government recommended the establishment of a new regulator with wider powers.

The Pensions Regulator has been given extended powers to improve the security of members' benefits.
It focuses its attention on finding and dealing with the greatest risks to members' benefits.
It works with trustees and scheme managers to raise standards of scheme administration.
It also reduces the risk of situations arising which may lead to calls for compensation from the Pension Protection Fund.

The Pensions Regulator takes a risk-based approach to regulation.
It looks closely at pension schemes, assessing levels of risk and takes action to reduce or remove risks.
It puts in place information-gathering procedures, including a scheme return. These allow it to obtain the information it needs to assess whether a scheme is at risk.

The Pensions Regulator will be able to gather information about schemes in a variety of ways including:
- the scheme return;
- whistleblowing reports; and
- notifiable events.

The scheme return is an information-gathering procedure, designed to provide the regulator with the detailed information it needs to identify risks and emerging trends in the pensions industry.
The scheme return document must be completed by pension scheme trustees and returned to the Pensions Regulator.
It requests information about the scheme type, trustees, membership, advisers, employers and funding.
The first batch of scheme returns have been completed. Trustees will be expected to complete the return at least once every three years, but many schemes will receive a scheme return every year.

The Pensions Act 2004 sets out a legally binding duty to report breaches of pensions law to the Pensions Regulator.
So-called 'whistleblowers' will have to report breaches they consider to be 'materially significant', that is, breaches that are likely to put members' benefits at risk. The regulator has issued a code of practice and guidance for reporters.
Reporters include trustees, advisers, managers of schemes not set up under trust, and employers.
In the event that information about a 'materially significant' breach is withheld, the regulator can fine individuals up to £5,000 and companies up to £50,000.

The Pension Protection Fund, set up under the Pensions Act 2004, aims to help members of defined benefit pension schemes if an employer becomes insolvent and there are insufficient funds to pay expected levels of benefit.
In order to provide early warning of calls on this fund, the regulator requires information on 'notifiable events', of where there may be a problem with a pension scheme or a sponsoring employer.
Trustees are required to report events relating to scheme funding.
Employers are required to report events relating to company solvency.
The Pensions Regulator will issue a code of practice on notifiable events.

The Pensions Regulator, through its enhanced information-gathering and investigatory powers, will work to protect the Pension Protection Fund from employers who intend to side-step their pension obligations (known as 'moral hazard'.) Powers to stop employers avoiding pension liabilities include:
- contribution notices - to require payment of the amount needed to meet the statutory debt to the trustees of a scheme (or to the Pension Protection Fund if it has assumed responsibility for a scheme);
- financial support directions - to require provision of financial support to an underfunded scheme.
The regulator will have in place a clearance procedure to give vital assurance to companies and individuals undertaking legitimate corporate transactions, that they will not fall foul of the 'moral hazard' clauses. The regulator will issue guidance so that companies will be able to tell when they should apply for a clearance statement, and what information the regulator will need.

A new regulatory tool of the Pensions Regulator - the code of practice - provides practical guidelines to trustees, employers and others involved in running pension schemes on how to comply with the requirements of pensions law.
Codes of practice are not statements of the law, but they refer to requirements of pensions law, which must be met. For example, trustees do not have to follow a code of practice, but they may incur penalties if they fail to meet the legal requirements.
Codes of practice have evidential value. When determining whether a legal requirement was met, a court or tribunal must take into account any relevant code of practice.
Initially, the Pensions Regulator will issue twelve codes of practice covering areas such as reporting breaches of the law, funding defined benefit schemes, trustee knowledge, understanding and conversance, notifiable events and dispute resolution.