Response to our consultation on a revised enforcement policy and an update to our prosecution policy.
Published: 25 October 2022
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Background
The government policy intent behind the new powers introduced in the Pension Schemes Act 2021 was to strengthen TPR’s regulatory framework to enable us to gather evidence more efficiently and be notified of events that could affect schemes. It also introduced a number of deterrents against conduct that could put members’ pensions at risk.
The development of the specific policies to explain our approach to these new powers highlighted a need to update our existing strategies and compliance and enforcement policies and be more transparent about our approach to the use of all our enforcement powers.
Our approach to enforcement has evolved over years of using our regulatory powers, and from experience of civil and criminal court proceedings, as well as our work with other regulators. We have also adapted it in recent years to reflect the implementation of our new strategic operating model and the creation of our enforcement team.
We resolved to consolidate our enforcement policies in relation to defined benefit (DB), defined contribution (DC), and public service pension schemes, as well as some aspects of master trust enforcement. In May 2022, we consulted on our consolidated and simplified enforcement policy, and our updated and revised prosecution policy. This response document summarises the key points that stakeholders raised during that consultation and how we have addressed their comments.
Consultation responses
Key issues raised
The responses were positive about the decision to produce one enforcement policy setting out our general approach to the investigation and use of our enforcement powers in respect of DB, DC, public service pension schemes, and some aspects of master trust enforcement. The respondents generally supported the new layout, and most felt that it was easier to navigate than one long webpage.
The updates to the prosecution policy were also well received, with many commenting that both policies provide useful clarity on TPR’s approach, particularly with the addition of case examples. There were however, a number of areas where further details were sought:
- Our assessment of the risk and harm factors and the impact of our wider corporate priorities.
- Our approach to the potential for enforcement action against trustees of transferring schemes in instances of pension scams.
- More detail on the enforcement options we use in specific circumstances.
- More information on the instances where there is an overlap in powers and what option TPR would take.
- Insight into the internal decision making for opening investigations, with an opportunity to challenge the scope and focus of an investigation.
- More reassurance that any information requests will be reasonable and proportionate.
Comments received and how we have responded to them
Enforcement policy
We asked: Does the policy provide clarity on our overall approach to enforcement activity, our decisions and options and use of our enforcement powers?
You said:
- While the policy does assist in providing clarity on TPR’s approach, we have retained a large degree of flexibility in the options available to us. This combined with the suggestion that the risk and harm factors may be considered differently based on our wider corporate priorities, means that potential subjects of our enforcement action cannot be certain whether action will be taken and what that action might be.
- The policy appears to suggest that we may take enforcement action on trustees of transferring schemes in instances of pension scams.
- TPR should provide further information on the other bodies mentioned, for example the Upper Tribunal and the Determinations Panel.
- The subject of an enforcement investigation should be given notice of intent to open an investigation and the opportunity to challenge the decision, as well as the scope of any investigation.
- Further information should be given on our approach to our scheme funding powers under s231 PA04.
Our response:
Through these policies and the recently published information gathering, overlapping powers, high fines policy (avoidance) and high fines policy (information requirements), and criminal offences policy, relating to s58A and s58B of the Pensions Act 2004, we have provided as much information as possible about: how we select cases for enforcement, the types of powers we will consider, and how we will approach choosing between different powers where more than one may be available to us on the same set of facts. However, it is important that we retain flexibility in that choice, given the broad nature of some of our powers and the often complex and scheme specific circumstances we encounter. We have taken on board feedback from previous consultations and have added case studies and examples to give an indication of the principles we apply in certain instances. As our case law develops using these powers, we will continue to review and update our guidance and policies where appropriate.
Our policies set out how and when we expect to communicate with targets of potential enforcement action, as well as giving an example of when that might not be appropriate. In response to feedback, we have included a further example of when that might apply. However, we do not agree with the suggestion that we should invite representations from targets of potential enforcement action, on our decision to open an investigation or provide details of the scope of that investigation. In most cases, we will already have been engaging with the parties involved before opening an investigation, as we will typically try to resolve matters without the need for enforcement action. This means that it will usually be apparent what the areas of focus for our investigation are likely to be. When an investigation is opened, our case team procedure and staff determination procedure govern our conduct of regulatory enforcement cases. These procedures give targets and other directly affected parties information on what to expect from us, and the opportunity to provide representations on our proposed action before any final decision is made. For cases referred to the Determinations Panel for a decision, the Determinations Panel procedure allows further opportunities for representations to be made. Updated versions of the case team procedure and the Determinations Panel procedure have been published.
For investigations which may result in criminal proceedings or may seek to freeze or recover assets, there may be tipping off concerns or potential prejudice to the investigation, which means that it would be inappropriate to notify targets or discuss the scope of our investigation with them.
We have amended the policy to make it clear that we would not usually expect to take action against trustees of transferring schemes in instances of pension scams and have also provided further information on the Determinations Panel and the Upper Tribunal.
This policy describes our general approach to the use of our enforcement powers in relation to DB, DC, and public service pension schemes, as well as some aspects of Master Trust enforcement. It does not focus on any particular power, but highlights relevant codes, guidance, statements, and other publications, (see document library) which set out how we expect trustees and other persons to meet their legal and other obligations towards schemes. Now the government has published the draft DB funding regulations for consultation, our new DB funding code will be published for consultation shortly, which will give more detail on our approach to our scheme funding powers.
We asked: Does the policy give sufficient guidance to those who are the subject of our enforcement action about what to expect from us and what procedures apply?
You said:
- We should give 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.
- We should be clear when issuing information requests whether the recipient is a target of our investigation.
- We should provide further clarity on how to challenge information requests and in what circumstances we would be prepared to amend the scope of those requests, particularly where issues of legal privilege arise.
- We should provide further information on our approach where our powers may overlap with those of other organisations, such as insolvency practitioners.
- We should provide more information on how we decide to use our criminal powers with links to the relevant Crown Prosecution guidance.
- We seem to have provided an exhaustive list of the types of financial support we would consider once a Financial Support Direction has been issued.
Our response:
Generally, unless it may prejudice our investigation, we write to the potential targets of our enforcement action when an investigation has opened. Where we discover information during an investigation which identifies additional targets that were unknown to us earlier, we will at that stage write to them. When subsequently contacting potential targets or other parties for information, we set out the functions engaged and the powers that are being contemplated, and usually provide a high-level summary of our concerns. This means that when an information request is received, the recipient will usually already know if they are a potential target. When we seek information, we also make it clear if it is a voluntary request, or if we are using our statutory information gathering powers.
When using our statutory powers to gather information, our notice clearly sets out what information is required and provides information and guidance on issues such as: privilege, confidentiality, self-incrimination. We also explain how to contact us to discuss the content or requirements of the notice, or other matters, and details of what action we may take if there is failure to comply. However, we cannot provide advice if a party wishes to challenge a request for information or a statutory notice, and the recipient will need to obtain that advice themselves. As this situation will be case and fact specific and may depend on the power in contemplation and the type of information requested, we do not agree that it is appropriate or helpful to provide further details in this policy. As noted above, we always provide contact details should the recipient of a request or a notice wish to raise any issues or queries with us.
We have included some information on working with other agencies where this is necessary and desirable, which includes situations where our powers potentially overlap. It is important that we do not try to be too prescriptive in our policy, as the circumstances where this arises are often both scheme and fact specific. We need to be able to work flexibly with other agencies where appropriate, to ensure that we achieve the best outcome for members.
Our prosecution policy provides more information about how we use our criminal powers, including setting out the tests that prosecutors are required to meet when making a decision about whether to prosecute, and so we do not feel we need to repeat it in our enforcement policy.
We have also amended the policy to make it clear that the examples of financial support provided are not an exhaustive list.
We asked: Does the policy give sufficient guidance on what procedures apply and how to challenge enforcement decisions?
You said:
- When a decision on a penalty notice review is given, it should include the reasons for that decision.
- Any Determination Notice or other penalty or compliance notices should include details on how the decision can be challenged.
- We should make it clear whether decisions will be published while they are still subject to challenge.
Our response:
We agree that reasons for the decision should and would be given, and so we have amended the policy to make this clear. The policy sets out details on how to challenge our decisions and this information is always included with the Determination Notice or other penalty or compliance notices.
We are not prescriptive about when we will publish decisions and our consideration will depend on a number of factors and relevant matters, including whether the decision is subject to challenge. More detail is provided in our publication policy, which is referred to in the enforcement policy.
We asked: Is the proposed layout easy to follow and can you easily find the information you are looking for?
You said:
Overall respondents were very supportive of the new layout, but had a few suggestions:
- Section numbers and a contents page/index should be added.
- We should make a pdf version available for printing.
- We should state on each page when any updates are made, and ideally should have a dedicated webpage to list updates to all policies and when they are made.
Our response:
We have concluded that section headings rather than numbers should be used to maintain flexibility and avoid confusion, for example if we add additional sections to the policy in the future. We do accept though that there were some confusing references made to section numbers within the consultation document and apologise for this.
Once published on our website, there will be an index pane on the left-hand side of the page, so that the various sections and their contents can be seen at a glance and each section can be printed as a pdf.
There will be a note on each page showing the date it was last updated, so it will be clear that it is the latest version, and so we don’t think it’s necessary to have a separate page repeating this information, which is harder to keep up to date.
We asked: Do you have any other feedback on the enforcement policy?
You said:
- There are 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.
- We should revisit our position on the payment of financial penalties, to reflect the difficulties faced by corporate trustees or trustees of multi-employer schemes accessing indemnity or other funds within the 28-day time limit.
Our response:
Although we acknowledge there could be an increase in pension disputes, we expect the majority will be resolved directly between the member and the scheme. Should TPR decide to investigate, we would continue to apply the principle set out in our policy, that information requests and notices will be reasonable and proportionate. If the recipient contacts us because they have difficulties complying, we will act reasonably and pragmatically to enable them to best manage the burden and impact on them, while not unduly delaying or frustrating our own investigation.
We do not intend to revisit our position on financial penalty payments in the enforcement policy. There is a section on hardship in our existing monetary penalties policy which also applies to our new high fines policies, which we think sufficiently covers situations where targets may have difficulty paying a penalty within the original deadline.
Prosecution policy
We asked: Does the updated policy provide clarity on our approach to the investigation and prosecution of criminal offences?
You said:
- We should provide clarity on what we mean by “consideration of our available resources” when deciding whether to open an investigation or pursue a prosecution.
- There were numerous drafting suggestions to make the document ‘clearer’, for example, reference to neglect, specific criteria, and comment made that reference to seeking a suspect’s ‘side of the story’ suggested that we approached this step with a closed mind.
- The policy is too focused on deliberate acts and should provide more detail on breaches from unintentional actions.
- We should include information about where we may seek recovery of costs.
- We should identify at the start of an investigation whether we have chosen to pursue criminal or a regulatory powers.
- The factors included are too broad and we should provide further clarity on when we might use our criminal powers.
- Will there be an additional team within TPR to carry out prosecutions, or will we be liaising with the Crown Prosecution Service for this.
Our response:
Where we agree that additional clarity is helpful, correct in law, and best reflects how we approach our criminal cases, we have made the amendments suggested by the respondents. We have also given more details on what we mean by “consideration of our available resources”. We have added content into the section on recovery of costs.
We accept that the policy is generally focused on deliberate acts. This was intended as we have stated elsewhere, we usually reserve our criminal powers for more serious conduct or behaviour. Except for offences where legislation intends to target conduct as a strict liability matter (for example, employer related investments), we are unlikely to consider genuine ‘unintentional breaches’ as justifying the use of our criminal powers.
It will not always be possible to decide at the start of an investigation whether we are going to pursue criminal or regulatory powers or both, as often this will depend on the evidence gathered during the investigation. We will, however, be as transparent as possible, and will inform parties which powers we are considering, where it is appropriate to do so.
As noted above about the enforcement policy, it is important that we are flexible with our decision whether to open, investigate, and pursue a prosecution, given the scope and nature of some of our powers and the often complex and scheme specific circumstances we meet. In the enforcement policy under the overlapping powers section, we give case examples which give guidance on the powers we may use in particular circumstances, and this includes ones involving use of our criminal powers.
TPR usually acts as a private prosecutor and is a designated prosecutor for the offences under s58A and s58B of the Pensions Act 2004, so while we might liaise with them we would not typically approach the Crown Prosecution Service to act as prosecutor on our cases. We have a specialist in-house team for our criminal cases, and where necessary we will liaise with other external agencies, such as the City of London Police or the Serious Fraud Office, depending on the case issues.
We asked: Do you have any other feedback on the prosecution policy?
You said:
- We should not include ‘non-compliance with our guidance’ as a factor when considering whether to use our criminal powers.
- Similar comments about the McCloud remedy and its impact on public service schemes, as raised above on the enforcement policy.
Our response:
Non-compliance with our guidance is only one of a number of factors listed which may influence our decision making on whether to focus our investigation on potential use of criminal powers. Our guidance is issued to help our regulated community understand what we expect from them to meet their legal and other obligations, and although it may not be binding, we would expect a court to take it into account, and so we think it is reasonable to retain this as a relevant factor. As our policy sets out, our assessment is based on the facts of the individual case, so the connection between any non-compliance with our guidance and the alleged offending will vary from case to case.
Our response regarding the impact of the McCloud judgment in this context is the same as given above in relation to the enforcement policy.
Appendix: List of respondents to the consultation
- Aon
- APL
- Cardano
- Eversheds Sutherland
- ICAS
- Institute for Family Business
- Local Pensions Partnership Association
- London Pension Fund Authority
- PLSA
- PMI
- SPP
- USS
- Willis Towers Watson