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Trustees warned to meet basic governance requirements or face financial penalties

Ref: PN17-34
Wednesday 5 July 2017

New data published today by The Pensions Regulator (TPR) shows that trustees of pension schemes who fail in their basic duties can expect to receive a penalty from TPR.

TPR has issued two compliance and enforcement bulletins showing how it has used its powers to tackle non-compliance with legal requirements for pension schemes to complete a scheme return and annual chair’s statement. The aim of the bulletins is to inform the industry of TPR’s experience to date and to increase trustees’ understanding of these duties.

The majority of schemes complied with new legislation obliging them to prepare an annual governance statement, signed by the chair of trustees. During 2016, 85 schemes received a mandatory fine for not preparing a chair’s statement. A large proportion of those failing to produce a statement were schemes with fewer than 100 members.

A second bulletin details the action taken by TPR to achieve compliance with legal requirements to provide TPR with a scheme return.

TPR received 16,963 scheme returns, and after starting enforcement action against trustees received a further 868 returns. A number of trustees failed to comply even after receiving a warning from TPR and so we issued fines to 88 trustees.

Nicola Parish, Executive Director for Frontline Regulation at TPR, said: “Non-compliance with basic requirements such as completion of a chair’s statement and a scheme return may indicate broader governance issues. This is important because ultimately, poor standards of governance can impact the value of members’ pension pots. We want all members to be saving in well-run schemes and will take action to help schemes get the basics right.

"Our 21st Century trustee work is focused on raising the standard of trusteeship and our enforcement action is an important part of that.

"We communicate regularly with trustees to educate them on their duties and to draw attention to our codes and guidance. Our trustee toolkit includes a series of online learning modules and downloadable resources developed to help trustees meet the minimum level of knowledge and understanding introduced in the Pensions Act 2004. Despite this, some continue to fail to meet basic governance requirements. Our message to them is that ignorance is no excuse – if you breach your duties, you will face action."

Last year TPR made clear it would act after data showed compliance with basic duties had fallen 18%. As a result of our focus on scheme return compliance and enforcement efforts, over 97% of schemes are now compliant.

Editor's notes

  1. The scheme return is how TPR captures information about pension schemes – to maintain our register of pension schemes and to help us identify pension schemes where there’s a potential risk to members’ benefits. We also use this information to calculate annual levy charges and monitor compliance with the chair’s statement and charge controls requirements.
  2. TPR issues warning notices to trustees and managers that have failed to comply with their legal duty to provide a scheme return to us by the required date. A warning notice will indicate that TPR will impose a financial penalty against the trustee(s) or manager, unless they provide their scheme return by a certain date.
  3. There is a discretionary penalty for failing to provide a scheme return, and we can impose a maximum fine of £5,000 for each individual trustee and up to £50,000 in other cases (eg corporate trustees).
  4. Occupational schemes providing money purchase benefits are required by law to prepare an annual statement, signed by the chair of the trustees, within seven months of the end of each scheme year. TPR is required by law to issue a fine for failing to provide a chair’s statement. Fines can range from £500 to £2,000.
  5. We expect to publish further details on fines for non-compliance with basic duties in our next quarterly compliance and enforcement bulletin later in July.
  6. The annual scheme return provides an important source of data and information for TPR.
  7. TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).

Press contacts

Matt Adams 01273 662086

pressoffice@thepensionsregulator.gov.uk

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