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Proposed approach to our new powers

Overlapping powers policy

Introduction

As the regulator of the UK’s workplace pensions we have a range of enforcement options available to us. In certain circumstances, both regulatory and criminal powers may apply. This policy explains our approach in those circumstances and should be read in conjunction with our other policies.

Our approach will depend on the facts of each case, the issues identified, the resulting impact, and the outcome(s) each different route might secure.

While there are also instances where there is an overlap between our civil powers in the High Court and either our criminal or regulatory powers, they are not within the scope of this policy. 

Our regulatory, civil and criminal powers

Regulatory powers

These are statutory powers relating to the regulation of workplace pension schemes, such as clearance or trustee appointment powers. They can be used by staff at The Pensions Regulator (TPR) or by the Determinations Panel (a committee that operates separately from other parts of the organisation, including the enforcement team).

Civil powers

These are powers that we can ask the civil courts to exercise (eg the power to order an injunction[1], or to order that assets are restored to a scheme[2]. 

Criminal powers

These are powers used in the criminal courts where we act as prosecutor[3]. They are exercised either through specific pensions legislation or where we can act as a private prosecutor.

Overlap

By ‘overlap’, we mean that there may be situations where more than one power could be used in relation to the same set of facts, and we reach the view that we have sufficient evidence to bring both regulatory and criminal proceedings[4]. When we refer to ‘overlapping powers’, we don’t  mean that those powers necessarily have identical scope or that all the conditions for use of the relevant powers are necessarily the same.

For example, an employer has a defined benefit scheme with a significant deficit. The employer sells the whole business and the proceeds are immediately paid to the employer’s parent as a dividend. This could both meet the ‘act’ test for a ‘material detriment’ Contribution Notice (CN) under section 38 of the Pensions Act 2004 and be the subject of a prosecution under section 58B of that Act.

Table 1: Sets out situations where both regulatory and criminal powers may be available to us
Action Regulatory notice Regulatory penalty Prosecution
Main purpose contribution notice / avoidance of employer debt to the scheme Yes – s38 Pensions Act 2004 Yes Yes – s58A Pensions Act 2004
Material detriment contribution notice / conduct which risks accrued scheme benefits Yes – s38 Pensions Act 2004 Yes Yes – s58B Pensions Act 2004
Misusing or misappropriating scheme assets No, but an application can be made to a court for an injunction or interdict under s15 Pensions Act 2004 (PA04) or restitution under s16 PA04 No Yes – s.1 Fraud Act 2006 or s.1 Theft Act 1968 (other offences such as false accounting or money laundering may also be committed)
Failing to give notice to TPR (notifiable events / statement of intent) Yes – s13 PA04 s.69A PA04
(applying s88A PA04)
No
Providing false or misleading information in a notice to TPR (notifiable events/statement of intent) Yes – s13 PA04 No s80 PA04
Failing to comply with automatic enrolment duties Yes – s35 Pensions Act 2008 (PA08) Yes – s40(2) PA08 Yes – s45 PA08
Failing to comply with information notice Yes – s13 PA04 Yes – for automatic enrolment – s40(1)(d) and s41(1)(d) PA08
Yes – all other instances – s77A(1)(a) PA04 (Fixed Penalty Notice) and 77B(1) (Escalating Penalty Notice)
Yes – s77(1) Pensions Act 2004 (PA04)
Failing to comply with an interview notice Yes – s13 PA04 Yes – s77A(1)(a) PA04 (FPN) and 77B(1) (EPN) Yes – s77(2) PA04
Failing to comply with inspection Yes – s13 PA04 Yes – s77A(1)(b) PA04 Yes – s77(2) PA04
Preventing or hindering an inspector Yes – s13 PA04 Yes – s77A(1)(c) PA04 Yes – s77(2) PA04
Destroying etc document required in information notice or inspection Yes – s13 PA04 No Yes – s77(5) PA04
Providing false or misleading information to TPR Yes – s13 PA04 Yes – s80A PA04
(applying s88A PA04)
Yes – s80(1) PA04
Providing false or misleading information to trustees or managers Yes – s13 PA04 Yes – s80B PA04
(applying s88A PA04) 
No
Disclosing restricted information Yes – s13 PA04 No Yes – s82(5) PA04
Acting as trustee while prohibited or suspended Yes – s13 PA04 No Yes – s6(1) Pensions Act 1995 (PA95)
Acting as auditor or actuary of trust scheme while ineligible Yes – s13 PA04 No Yes – s28(1) PA95
Acting as trustee while disqualified
Yes – s13 PA04 No Yes – s30(3) PA95
Exceeding permitted level of employer-related investment Yes – s13 PA04 Yes, for a trust scheme – s10 PA95
No for a contract scheme
Yes – s40(5) PA95
Failing to pass on employee contributions to a trust-based occupational pension scheme Yes – s13 PA04 Yes – s10 PA95 Yes – s49(11) PA95
Failing to pass on employee contributions to personal pension scheme under direct payment arrangements Yes – s13 PA04
Yes – s10 PA95
Yes – s111A(12) Pension Schemes Act 1993

There may also be cases where an individual or organisation carries out multiple acts, some of which potentially contravene the criminal law and some of which are within the scope of our regulatory powers, but not both. These cases are not addressed in this document. 

Nature and effect of powers

In the overlapping situations, there may be three kinds of powers available to us:

  • the power to issue a statutory notice (other than a financial penalty notice)  
  • the power to impose a financial penalty[5]
  • the power to bring a prosecution

When choosing between powers we will take into account the nature and effect of each of the powers available to us and the outcome use of each might achieve.

Statutory notices

These direct a person to do something (eg provide us with information or documents, or pay a sum of money to a scheme), or take certain steps or refrain from acting in a particular way (eg remedy a breach of pensions legislation or prevent any recurrence).

Failure to comply with such a notice may lead to financial penalties and/or criminal sanction. 

Financial penalties

These are intended to punish the person responsible for the non-compliance and to encourage future compliance.

Prosecution 

Statutory notices are primarily directed towards securing an action, an outcome, or providing a remedy. For example, CNs issued under our avoidance powers require a cash payment to be made directly into the scheme or to the Pension Protection Fund (the PPF) for the benefit of members.

An Improvement Notice, Third Party Notice or Compliance Notice is used to direct a person to take steps to end an ongoing breach, to put right any harm caused, or to prevent its recurrence. In some instances, they may be combined with use of other powers or followed with penalty proceedings if the issue is not resolved according to the requirements of the notice.

Financial penalties and criminal proceedings are primarily directed towards punishment for more serious behaviour. They can also serve as a deterrent against similar behaviour in the future. In some instances, the criminal courts have powers to recover assets or benefits obtained as a result of criminal activity, through ancillary powers such as confiscation and compensation orders under the Proceeds of Crime Act 2002. We may also take regulatory action in conjunction with penalty or criminal proceedings to address certain breaches of pensions legislation and/or to secure recoveries for a scheme for the benefit of members. 

Criminal conviction can, in some instances lead to a custodial sentence, and it generally carries a greater stigma. It may have additional adverse consequences for businesses and individuals, such as disqualification from acting as a trustee if convicted of any offence involving dishonesty or deception. 

This is reflected in the fact that the criminal courts require offences to be proved beyond reasonable doubt, while we can use our regulatory and financial penalty powers if we are satisfied on the balance of probabilities.

Breaches of legislation (excluding employer-related investments) 

This is reserved for the most serious behaviour and is intended to provide a more severe punishment and sanction for the person responsible and to deter further offences by the person or others. 

Where there is the opportunity to remedy the breach, we will usually address it through an  Improvement Notice or  Compliance  Notice. If this fails to resolve the situation, we  may  issue  financial penalties  for failing to comply with the notice and, if the breach continues, criminal proceedings. 

Where the impact of remedying the breach is limited, we may  immediately move to a financial penalty rather than first pursuing an Improvement Notice or Compliance Notice.  An example of this could be where a person has provided us with false or misleading information. Giving us the correct information later on would have limited impact if we knew it was false or misleading by other means.

Where there are aggravating features which mean that an  Improvement  Notice, a  Compliance  Notice  or financial penalty  would be inadequate (such as previous breaches,  an ongoing pattern of non-compliance, or  clear  deliberate  or dishonest  behaviour) we may move immediately to  criminal proceedings. 

In a situation where it is appropriate for us to use criminal powers, we may also need to take regulatory action to ensure the breach is remedied (eg by directing an employer to pay missing pension contributions or to automatically enrol eligible staff). We would usually aim to issue the notice as soon as possible, although it may be necessary to wait until the criminal proceedings  have begun to avoid any prejudice to the investigation, such as where there is a risk that the offender may conceal or destroy evidence.

We will not pursue criminal proceedings and penalty proceedings for the same act(s).

Breaches of a direction or restriction imposed by TPR 

We view the breach of any requirement set by us (eg to provide documents or information or to attend an interview) as unacceptable, particularly if this results in delaying or obstructing our investigations. In these instances, we may immediately seek to impose fixed and escalating financial penalties to secure compliance or, in the most serious cases of deliberate wilful conduct, begin criminal proceedings. 

We assess the circumstances of the breach to determine whether a financial penalty might be sufficient to secure compliance and provide an effective punishment, or whether the use of our criminal powers is more appropriate. For example, in the case of a breach resulting from lack of care which causes limited harm where the underlying issue is addressed, a financial penalty may be suitable. However, where the offender is a professional who is subject to rules of conduct that emphasise the importance of compliance with the law, or the breach continues to cause harm, we would typically consider criminal proceedings. 

We also have the option of issuing an Improvement Notice in these circumstances. However, as this would just repeat the direction or restriction that had already been breached it would not serve to punish the breach, or effectively deter the person from continuing or repeating the behaviour. It is therefore unlikely that we would take this route. 

Breach of the prohibition on employer- related investment (ERI)  

Where we see the possibility of ERI, our initial response is to investigate to determine the appropriate response and which powers might be available to us (financial penalty or criminal). We may pursue our investigation through a combination of our regulatory information gathering powers, criminal powers, or both (for more on this see Investigations below). 

The individual’s awareness, proximity to the decision to carry out the prohibited ERI, behaviours and harm caused will determine whether we pursue criminal proceedings or a financial penalty. We will also consider whether any aggravating features are present, such as ignoring warnings from advisers or other parties, previous TPR sanctions, significant loss to the scheme resulting from the investment, any personal gain, or evidence of dishonesty. The presence of mitigating features, such as prompt action to remedy the breach, may result in a case being considered appropriate for a financial penalty rather than criminal prosecution. 

Avoidance 

Where evidence of avoidance comes to our attention, our initial response will be to investigate to determine the appropriate response and which powers might be available to us. We may pursue our investigation through a combination of our regulatory information gathering powers or criminal powers, or both. 

To protect the security of savers, our primary objective when considering avoidance behaviour will be obtaining funds for the scheme and/or protection of the PPF.  It is therefore likely we will prioritise regulatory proceedings seeking a  CN. However, there may also be grounds to pursue criminal proceedings or a financial penalty as an alternative, or a combination of both.

We will consider issuing a financial penalty for avoidance of employer debt or conduct risking accrued scheme benefits[6]  where the behaviour is serious in  nature. The Determinations Panel can impose a fine of up to £1m. The seriousness of the behaviour and its impact on the scheme, as well as any aggravating or mitigating features, will determine the amount sought, as set out in the Monetary penalty powers policy - High fines (Avoidance).

Where we are seeking both a CN and a financial penalty, we will generally pursue proceedings in tandem, but would require any CN sum to be paid before the penalty. 

As set out in our policy Our approach to the investigation and prosecution of the criminal offences in sections 58A and 58B of the Pensions Act 2004, we can only use our criminal powers where there is evidence (beyond reasonable doubt), and where the applicable prosecutor’s test(s) for prosecution are met. You can read more general  information about how we approach prosecutions in our Prosecution Policy.

Where we pursue both regulatory and criminal proceedings, we will usually exhaust criminal proceedings before seeking any regulatory remedy. However, we may pursue regulatory proceedings for a CN first, or in tandem, to address the harm to the scheme and to ensure that time limits for exercise of the CN power are not exceeded. 

We may pursue a criminal prosecution without pursuing a CN. For example, it might not be reasonable to impose a CN on the potential targets if there is no prospect of any meaningful recovery, or if they are not associated or connected to the scheme employer. 

Investigations

We have a number of investigative powers available to us in both regulatory and criminal cases. As well as issuing Information Notices, which require a person to provide documents and information, we can conduct interviews, inspect premises and obtain search warrants. These powers allow us to compel people to answer our questions, and to give us an account of their actions, but we would not (and are not able to) use their answers against them in criminal proceedings or where we are asking our Determinations Panel to impose a financial penalty[8]. However, any pre-existing documents obtained or provided through using these powers would be admissible in any subsequent proceedings, whether regulatory (including financial penalties) or criminal. 

Where we are investigating with a view to bringing criminal proceedings, we will follow the relevant legislation and Codes of Practice issued under the Police and Criminal Evidence Act 1984 (PACE) and the Criminal Procedure and Investigations Act 1996 (CPIA) in relation to the way suspects should be questioned and / or interviewed and how the material that we gather should be retained, recorded and disclosed. We cannot compel a suspect to attend a PACE interview or to answer questions if they attend an interview but the failure to do so may lead to adverse inferences being drawn and used against the suspect in evidence in any criminal trial that might result.

We will be transparent and ensure that all parties are fully informed about which powers we are considering using when they are legally required to provide us with information.

In the event of non-compliance with our regulatory investigation powers, we may have the choice to impose financial penalties (Fixed Penalty Notice[9] and Escalating Penalty Notice[10]) or to pursue a criminal prosecution[11]. We will reach a view on the most appropriate course of action, based on the severity and duration of the breach, including the impact on our investigation. In certain circumstances we may consider that, in the absence of a reasonable excuse, or relation to willful non-compliance a criminal offence has been committed, which may ultimately lead to prosecution. Please see our policy on our approach to gathering information for investigations for more information.

Non-pensions legislation offences 

Our prosecution powers are not limited to offences created by pensions legislation. Unless otherwise restricted to specific Prosecuting Authorities, we can prosecute any offence if this would help us carry out our statutory functions or is incidental to carrying them out. An example would be a prosecution for fraud by abuse of position, contrary to s1 of the Fraud Act 2006.

In circumstances where we uncover evidence of criminality which is not connected to our functions, we will pass this to the appropriate law enforcement agency, who will then determine whether to take the matter forward.

Where the subject of one of our investigations is also of interest to another agency, we will usually liaise with them before deciding whether an investigation or any prosecution should be carried out by us, the other agency, or whether a joint investigation is appropriate. 

Settlement 

Our approach to settlement of our regulatory and civil enforcement cases is guided by our statutory objectives and principles as set out in our Settlement Policy.

However, where we pursue or may be asked to consider) settlement of our enforcement action, this expressly excludes criminal cases as we cannot 'settle' criminal proceedings out of court as a matter of law. You can read more about our approach to investigating and prosecuting our criminal cases in our Prosecution Policy. 

Case examples

ERI 

In March 2020, Trustees A and B are approached by the employer for a loan to enable it to buy some machinery to enhance the capability of the business. Trustee A is also the chief financial officer of the employer and a shareholder, and Trustee B is a professional trustee. Together, the trustees agree to make the loan to the employer with a five-year repayment schedule. This is in contravention of section 40 of the Pensions Act 1995, which prohibits any of the scheme’s resources being invested as an employer-related loan. 

In October 2020, Trustee C is appointed as a member-nominated trustee to the trustee board. He is made aware of the loan as part of a review of the scheme accounts but takes no further action. 

Loan repayments are made throughout 2020 and early 2021. In March 2021, the scheme actuary notifies us of the loan.

In this scenario we could pursue either a criminal prosecution against Trustees A and B (for agreeing to make the loan), and a financial penalty against any of the trustees (for failing to take all reasonable steps to remedy the ongoing breach). As part of the initial evidence gathering, we will consider both options and may decide to interview each of the trustees under caution.

During the investigation a number of factors will affect which option we pursue, including:

  • whether the trustees are professional or lay trustees
  • whether they were trustees at the time the loan was made
  • how any conflicts of interest and duties were managed
  • the likelihood of the monies being recovered for the scheme 

The actions of each trustee will be considered separately when deciding whether to pursue proceedings against them, and if so, which proceedings to bring. We would be likely to consider bringing a prosecution against Trustee A and B and taking action to impose a financial penalty on Trustee C.

CN 

Mr E is the chief executive and shareholder of company A, which is the sole employer of a pension scheme with a deficit on a buy-out basis of £50m. Company A is profitable but has limited free cash to fund the deficit, resulting in a lengthy recovery plan. 

Mr E takes deliberate steps to push Company A into administration by failing to make payments to a number of creditors. Company A enters administration and the scheme, together with the other unsecured creditors, receives nothing other than their share of the prescribed part, and the scheme enters PPF assessment. As part of a pre-pack sale, Mr E, through another one of his companies, buys the business of Company A free of the scheme. The price paid for business is less than its market value would have been had Company A not gone into administration.

In this scenario we will look to recover monies for the scheme/the PPF, so it is likely we will consider using our avoidance powers. However, given the apparent execution of a plan to separate the scheme from the business, we will also consider whether a financial penalty or a criminal prosecution may be appropriate. In doing this we take into account a number of factors, including the intention behind the acts, the level of knowledge of how the acts would impact the scheme, the actual impact on the scheme and the benefit received by Mr E.

Read our Monetary penalty powers policy - High fines (Avoidance) for more information about how we approach our penalty powers and considerations on the level of penalty.

Read our policy on how we approach the offences of avoidance of employer debt and conduct risking accrued scheme benefits, and our Prosecution Policy for general information about how we approach our criminal cases.

Information gathering 

As part of an investigation seeking the potential prohibition of Trustee D, we issue a notice under section 72 of the Pensions Act 2004 requiring Trustee D and Adviser F to provide copies of past trustee meeting minutes and relevant correspondence. 

Trustee D, a professional trustee, ignores the request and does not provide the information within the required time period. He provides no response to us at all, despite attempts at contact.

Adviser F seeks an initial time extension to provide the information which he acknowledges he has, and that extension is granted. By the time the revised deadline passes, Adviser F has provided some limited information but does not give a detailed and sufficient explanation as to why not all of the information has been provided and when the remaining information will be sent.

The failure to provide information results in a significant delay to our investigation and, during that time, Trustee D continues to make decisions on behalf of the scheme.

In light of his professional standing, his failure to engage at all, and the impact on our investigation, we would consider a criminal prosecution against Trustee D.

In the case of Adviser F, given his partial compliance and engagement with us, we may consider that a financial penalty is the most appropriate approach.

Footnotes for this section

  • [1] Section 15 of the Pensions Act 2004.
  • [2] Section 16 of the Pensions Act 2004.
  • [3] Or, in the case of prosecutions in Northern Ireland or Scotland, where TPR requests the appropriate regional prosecutor to prosecute the case following a TPR investigation.
  • [4] There may also be situations where our powers overlap with those of another regulator, law enforcement agency, which is covered below in this policy.
  • [5] Financial penalties will be collected by us but paid into the Consolidated Fund.
  • [6] Section 58C and 58D respectively of the Pensions Act 2004.
  • [7] In England and Wales: The Code for Crown Prosecutors | The Crown Prosecution Service (cps.gov.uk). In Northern Ireland: The Code for Prosecutors | Public Prosecution Service Northern Ireland (ppsni.gov.uk). In Scotland: The Scottish Prosecution Code | Crown Office and Procurator Fiscal Service (copfs.gov.uk).
  • [8] s310 of the Pensions Act 2004 - unless evidence relating to it is adduced, or a question relating to it is asked, in the relevant proceedings by or on behalf of that person. This does not include Contribution Notices or Financial Support Directions.
  • [9] A fixed penalty notice (FPN) may be issued under s77A(1) of PA04 when there has been a failure to comply with a statutory notice issued under s72, s72A, s73, s74 or a requirement given by an inspector under s75 of PA04.
  • [10] An escalating penalty notice (EPN) may be issued under section 77B(1) of PA04
    • following issue of notice under s72 of PA04, and the information is still outstanding
    • following a statutory notice to attend for interview, issued under s72A of PA04, and the person fails to attend the interview or fails to answer questions at the interview
    • and in each case, after the deadline set out in the FPN.
  • [11] under s77 of PA04.

Monetary penalty powers policy - high fines (avoidance)

TPR has the power to issue a financial penalty not exceeding £1 million where:

a. A person has failed to pay a debt due by virtue of a contribution notice (a CN) issued under section 38 of the Pensions Act 2004 (PA04) without reasonable excuse (section 42B(2) of PA04)

b. A person was party to an act or deliberate failure to act which:

i. had a main purpose of avoiding an employer debt to a pension scheme (section 58C(2) of PA04); or

ii. had a materially detrimental effect on the likelihood of accrued scheme benefits being received, and the person knew or ought to have known that their act or failure would have that effect (section 58D(2) of PA04),

and where, in the case of both b.i. and b.ii., it was not reasonable for the person to act or fail to act in the way they did. This Policy applies to those financial penalties.

Each of these penalties is discretionary.

Sections 88A to 88C of PA04 set out the conditions, processes and procedures that apply to these penalties and the recovery of them.

We also have the power to issue a high fine in other circumstances which are not covered by this policy. These are where a person:

a. has failed, without reasonable excuse, to comply with the requirements of the Notifiable Events regime (sections 69(7), 69(8) and 69A(13) of PA04),

b. has knowingly or recklessly provided false or misleading information to us (section 80A(1) of PA04), or

c. has knowingly or recklessly provided false or misleading information to trustees in particular circumstances (section 80B(2) of PA04).

For information on how we approach these penalties, please see ‘Monetary Penalties Policy - High fines (Information Requirements)’.

Where a penalty notice has been issued under section 10 of the Pensions Act 1995 we will not issue a penalty for the same act under section 88A PA04.

Under section 88A of PA04 the maximum financial penalty that may be issued is the same, regardless of whether the person being fined is an individual or a company.

We have the option to pursue a financial penalty or a criminal prosecution in respect of conduct that could be caught by the financial penalties listed above. For more information about our approach to the overlap between these powers and our existing anti-avoidance powers, read our Overlapping Powers Policy.

Our approach

Non-payment of a CN issued under section 38 PA04

The amount of the penalty will be directly linked to the amount ordered to be paid under the CN.

Subject to point 10 below, the penalty value will be fixed at 20% of the CN value, capped at £1m.

If payment of the CN is received before the Determinations Panel hearing to consider the imposition of a penalty, the value of any penalty issued by the Determinations Panel will be reduced to 10% of the CN value, capped at £0.5m.

For example:

a. In the case of non-payment of a CN of £4m, the value of any penalty issued by the Determinations Panel in respect of that non-payment will be:

i. £0.8m if the CN remains unpaid at the date of the Panel’s determination (ie 20% of £4m), or

ii. £0.4m if the CN is paid before the date of the Panel’s determination (ie 10% of £4m).

b. In the case of non-payment of a CN of £203m, the value of any penalty issued by the Determinations Panel in respect of that non-payment will be:

i. £1m if the CN remains unpaid at the date of the Panel’s determination (ie 20% of £203m, so £40.6m, but capped at £1m), or

ii. £0.5m if the CN is paid before the date of the Panel’s determination (ie 10% of £203m, so £20.3m, but capped at £0.5m).

Avoidance of employer debt or conduct risking accrued scheme benefits

Where a financial penalty is imposed on either of these bases, we expect to calculate the penalty in accordance with the following framework.

The value of the penalty will depend on:

a. the applicable band level, which depends on the person’s level of culpability and the harm caused to the scheme and saver outcomes, and

b. any aggravating and mitigating features present.

When determining the band level for a particular penalty we will take account of:

a. the level of culpability of those involved, and

b. the degree of harm to the scheme and saver outcomes.

Step 1: Band level: culpability and harm

Table 2: Shows the penalty value range that corresponds to each band level

Band Penalty Banding
Band HF1 Low culpability / Low harm £100,000 - £400,000
Band HF2 High culpability / Low harm
or
Low culpability / High harm 
£250,000 - £650,000
Band HF3 High culpability / High harm £400,000 - £1 million

We will consider evidence of any of the features listed below on the facts, and their severity (individually and collectively), when determining whether the band for the penalty should be Band HF1, Band HF2 or Band HF3.

Examples of culpability include:

  • deliberate act or failure; and/or causing / encouraging another person to act or fail to act
  • recklessness / negligence, based on actual foresight or what could reasonably be expected to have been known
  • significant decision-making power / influence
  • holding a position of trust or subject to professional duties.

The assessment of the level of a person’s culpability is not simply a question of the number of culpability features engaged on a given set of facts, but also the level of engagement of any such features. The culpability of a person whose conduct involves three features moderately may be less culpable than that of a person whose conduct has engaged a single culpability feature significantly.

For example, an intentional act by a person who misled others and who held a position of trust would likely attract high culpability.

Example features of harm that may be applicable, include:

  • any negative impact on the scheme as a whole or any of its members
  • whether the action is irreversible
  • whether the act has resulted in an increased reliance on the employer covenant
  • whether the act has increased the likelihood of compensation being payable by the Pension Protection Fund
  • whether the act may pose a significant or systemic risk to our statutory objectives
  • whether the act may undermine public confidence in pensions.

As with the assessment of culpability, the degree of harm will be relevant to the banding of a person’s penalty, rather than simply counting the number of features of harm applicable on the facts.

Step 2: Placement within the band: aggravating and mitigating factors

The degree of culpability and harm will determine which band the penalty falls in. The starting point for the value of any penalty will be the middle of the band (£0.25m for Band HF1, £0.45m for Band HF2, and £0.7m for Band HF3). We may then adjust the placement within the band up or down, taking account of any relevant aggravating and mitigating factors that might be present.

Example factors relevant to these specific penalties include:

  • evidence of dishonesty, lack of integrity, fraud and/or deliberate concealment (aggravating)
  • receipt of benefit or some other incentive as a result of the act (aggravating)
  • close relationship with the scheme/employer (aggravating)
  • absence of mitigation to the scheme (aggravating)
  • mitigation provided to the scheme (mitigating)
  • timeliness/proximity to act of provision of mitigation (either aggravating or mitigating)
  • extent of cooperation with us (either aggravating or mitigating)
  • evidence of previous acts or breaches that have or could have resulted in our imposing financial penalty (aggravating).

The above list may include some factors which are integral features of certain penalties. In such cases, the presence of the aggravating factor is already reflected in the rationale for the penalty and/or the assessment of degree of culpability and harm when determining the band level, so would not be used as justification for increasing the penalty further.

The list is not intended to be comprehensive, and the factors are not listed in any particular order of priority.

Monetary penalty powers policy - high fines (information gathering)

TPR has the power to issue a financial penalty not exceeding £1 million where:

a. A person has failed, without reasonable excuse, to comply with the requirements of the Notifiable Events regime (sections 69(7), 69(8) and 69A(13) of the Pensions Act 2004 (PA04))

b. A person has knowingly or recklessly provided false or misleading information to TPR (section 80A(1) of PA04) or

c. A person has knowingly or recklessly provided false or misleading information to trustees in particular circumstances (section 80B(2) of PA04).

This Policy applies to those financial penalties.

Each of these penalties is discretionary.

Sections 88A to 88C of PA04 set out the conditions, processes and procedures that apply to these penalties and their recovery.

We also have the power to issue a high fine in other circumstances which are not covered by this policy. These are where a person:

a. A person has failed to pay a debt due by virtue of a contribution notice issued under section 38 PA04 without reasonable excuse (section 42B(2) of PA04)

b. A person was party to an act or deliberate failure to act which:

i. had a main purpose of avoiding an employer debt to a pension scheme (section 58C(2) of PA04) or

ii. had a materially detrimental effect on the likelihood of accrued scheme benefits being received, and the person knew or ought to have known that their act or failure would have that effect (section 58D(2) of PA04)

and where, in the case of b.i. and b.ii, it was not reasonable for the person to act or fail to act as they did.

For information on how we approach these penalties, please see Monetary Penalties Policy - High fines (Avoidance)

Under section 88A of PA04, the maximum financial penalty that may be issued is the same, regardless of whether the person being fined is an individual or a company.

We have the option to pursue a financial penalty or a criminal prosecution in respect of conduct that could be caught by the financial penalty power listed under 1 b. above, of knowingly or recklessly providing false or misleading information to TPR For more information about our approach to the overlap between these penalty powers and our criminal powers, read our Overlapping Powers Policy.

Our Approach

Where we decide to impose a financial penalty on any of the bases set out in paragraph 1 above, we expect to calculate the penalty in accordance with the following framework.

The value of the penalty will depend on:

a. the applicable band level, which depends on the person’s level of culpability and the harm caused to the scheme and saver outcomes, and

b. any aggravating and mitigating features.

Step 1: Band level: culpability and harm

When determining the band level for a particular penalty we will take account of:

  • the level of culpability of those responsible, and
  • the degree of harm to the scheme and saver outcomes.

Table 3: shows the penalty value range that corresponds to each band level

Band Penalty Banding
Band ‘R’ Breach of regulatory requirement with minimal harm to the scheme £0 - £100,000
Band HF1 Low culpability / Low harm £100,000 - £400,000
Band HF2 High culpability / Low harm
or
Low culpability / High harm
£250,000 - £650,000
Band HF3 High culpability / High harm £400,000 - £1 million

We will consider evidence of any of the features listed below on the facts, and their severity (individually and collectively), when determining whether the band for the penalty should be Band R, Band HF1, Band HF2 or Band HF3.

Examples of culpability include:

  • deliberate act or failure
  • knowledge of the adverse consequences of the breach and/or act on the scheme or our ability to regulate
  • recklessness/negligence as to adverse consequences for the scheme or TPR, based on actual foresight or what could reasonably be expected to have been known

For failure to comply with the notifiable events regime penalties

  • Any further failure to report the breach within a reasonable period of it being identified

For providing false/misleading information penalties

  • If the person took no or insufficient steps to correct the information provided within a reasonable period of identifying that the information was or may have been false or misleading.

The assessment of the level of a person’s culpability is not simply a question of the number of culpability features engaged on a given set of facts, but also the level of engagement of any such features. The culpability of a person whose conduct involves three features moderately may be less culpable than that of a person whose conduct has engaged a single culpability feature significantly.

For example, an intentional act by a person who misleads TPR and others to avoid regulatory intervention, with a clear understanding of the adverse consequences for the scheme, is likely to attract high culpability.

Example of harm, include:

  • any negative impact on the scheme as a whole or any of its members
  • whether the breach has had an impact on the ability of the trustees to appropriately represent the interests of the scheme or any of its members
  • the extent to which action taken or not taken as a result of the breach is irreversible
  • whether the breach has led to an increased reliance on the employer covenant
  • whether the breach has led to an increased likelihood of compensation being payable by the Pension Protection Fund
  • the extent to which the breach has impacted or delayed our investigation
  • whether the breach has resulted in expiry of statutory deadline for us to take enforcement action
  • whether the breach may pose a significant or systemic risk to our statutory objectives
  • whether the breach may undermine public confidence in pensions.

As with the assessment of culpability, the degree of harm will be relevant to the banding of a person’s penalty, rather than simply the number of features of harm applicable on the facts.

Step 2: Placement within the band: aggravating and mitigating factors

The degree of culpability and harm will determine which band the penalty falls in. The starting point for the value of any penalty will be the middle of the band (so £50,000 for Band R, £0.25m for Band HF1, £0.45m for Band HF2, and £0.7m for Band HF3). We may then adjust the placement within the band up or down to take account of relevant aggravating and/or mitigating factors.

Example factors relevant to these specific penalties include:

  • evidence of dishonesty, lack of integrity, fraud and/or deliberate concealment of the breach (aggravating)
  • receipt of benefit or some other incentive as a result of the breach/act (aggravating)
  • little or no attempt to remedy the breach (aggravating)
  • evidence of multiple breaches of law (aggravating)
  • whether the reason for acting as they did was to conceal other breaches (only aggravating. The absence of this factor is not mitigating)
  • whether the reason for acting as they did was to prevent our intervention, investigation or enforcement (only aggravating. The absence of this factor is not mitigating)
  • evidence of persistent/repeated breach (aggravating)
  • extent of cooperation with us following the breach (either aggravating or mitigating)
  • evidence of suitable mitigation being provided to the scheme where appropriate (mitigating)
  • for failure to comply breaches, whether we had advanced notice of the event from the target by other means (mitigating)
  • for providing false/misleading information penalties, whether we were notified proactively once the target identified the issue (mitigating).

The above list may include some factors which are integral features of certain penalties. In such cases, the presence of the aggravating factor is already reflected in the rationale for the penalty and/or the assessment of degree of culpability and harm when determining the band level, so would not be used as justification for increasing the penalty further.

The list is not intended to be comprehensive, and the factors are not listed in any particular order of priority.

Information gathering powers policy

Our investigations involve making enquiries to gather relevant information and evidence.

We may need information, documentation or an explanation from pension scheme trustees, employers or any other person if we believe they could be in possession of relevant information or documents. These other persons include members, third party advisers giving advice or providing business services to trustees, and participating employers or providers of occupational pension schemes.

The information we ask for will depend on the powers we’re considering using and the specific circumstances of the investigation, including, but not limited to:

  • trustee meeting minutes
  • investment reports
  • statements of investment principles
  • scheme approved policies and procedures
  • risk registers
  • board resolutions and minutes
  • audit reports
  • annual reports and accounts
  • bank statements
  • relevant correspondence
  • relevant advice

Where applicable, we will comply with the Regulation of Investigatory Powers Act 2000 (‘RIPA’) when gathering information.

Information gathering options

Voluntary requests

We may seek information, documentation or an explanation, on a voluntary basis.

A reasonable amount of time will be allowed for a response to be provided, taking into account the amount and complexity of information requested, the accessibility of that information, as well as any statutory time limits for the use of potential powers. In some cases where we have clear evidence of scheme and/or member risk we may move straight to enforcement action (for example in special procedure cases).

As part of the investigation, we may need to take statements from individuals and/or conduct voluntary interviews with them. We will give reasonable notice if we intend to obtain a statement or require them to attend an interview. If we’re investigating a criminal offence, the interview will take place under caution and recorded in line with the relevant Code of Practice[12]  issued under the Police and Criminal Evidence Act 1984 (PACE). You can read more about our approach to criminal cases in our Prosecution Policy.

There may be occasions where the voluntary requests for information are not appropriate for our investigation, and in those cases we will move straight to compulsory statutory requests.

Statutory powers

We have a number of statutory investigative powers available to us in both regulatory and criminal cases. They are:

i. issuing Information Notices under section 72 of the Pensions Act 2004 (PA04) which require a person to provide documents and / or information which are relevant to our functions

ii. requiring a person to attend an interview under section 72A of PA04

iii. undertaking an inspection under section 73 of PA04 (supported by a warrant, if obtained, under section 78 of PA04) to obtain the information relevant to the exercise of our functions

We will be transparent and ensure that all parties are fully informed about which powers we are considering using when legally requiring them to provide us with information.

Information Notices - Section 72 of PA04

When issuing an Information Notice we will allow a reasonable period for compliance, taking into account the amount and complexity of information requested, the accessibility of that information, as well as any statutory time limits for the use of potential powers. We will also set out the method by which the information should be provided, for example, electronically, in hard copy, etc.

Failure to provide the information required by the Information Notice to us without reasonable excuse may lead to financial penalties and/or criminal prosecution (see further below).

If the recipient of an Information Notice requires more time to locate or gather the information, they should contact us as soon as possible to seek an extension. We will consider all reasonable and justifiable requests for this.

Where a person doesn’t have access to the documents or the information requested in the Information Notice they must tell us as soon as possible, and before the deadline for compliance. If not, we may impose sanctions for non-compliance with the notice (see more on this below).

Any pre-existing documents obtained or provided through the use of these powers would be admissible in any subsequent proceedings, whether regulatory (including financial penalties), civil or criminal proceedings.

A person is not required to produce any document which is a ‘protected item’ as defined in s311 of PA04. Protected items are broadly materials which are subject to legal professional privilege. If we find that we have taken possession of any protected items, we will return these to you or destroy them promptly, and will not make use of privileged information that comes into our possession in this way (unless privilege has been expressly waived when the document was submitted to us).

We will hold securely any information and documents that we obtain and will not disclose to a third party, except where it is permitted by law.

Interview Notices - Section 72A of PA04

These powers allow us to compel people to answer our questions, and to give us an account of their actions. We generally expect to use these powers in connection with our regulatory powers.

When we notify a person that they are required to attend for interview, we will usually allow a reasonable period for compliance, taking into account the impact on our investigation timeframes, as well as any statutory time limits for the use of potential powers.

There may occasions where an immediate interview is required or limited notice is given. On these occasions we will comply with the requirements set out section 72A(1) of PA04, set out below.

A notice issued by us under section 72A(1) of PA04 (Interviews) will also include the following information:

  • the details of the person required to attend the interview
  • the relevant power under which the interview is being conducted
  • a statement confirming which of our functions are being engaged
  • an explanation as to why the interview is being conducted
  • the details of how the interview process will be conducted
  • a statement setting out the interviewee’s right to be represented at the interview
  • a statement confirming that any statements made by the interviewee during the interview will be subject to section 310 of PA04 (admissibility of statements)
  • a statement setting out the legal effect of the interview notice and the possible sanctions for non-compliance
  • information relating to the process for rearranging the time or place of the interview

Where an interview is being conducted virtually, the interview notice must also contain the following:

  • the details for accessing the online platform
  • the details of how the virtual interview will be conducted

Failure to attend the interview without reasonable excuse or providing false or misleading information may lead to financial penalties and/or criminal prosecution (see more on this below).

If a person is unable to attend an interview at the specified date and time, they must contact us as soon as possible to explain the reasons for the non-attendance. We will consider all reasonable and justifiable requests.

We would not (and are not permitted to) use a person's answers given in this type of interview against them in criminal proceedings or where we are asking our Determinations Panel to impose a financial penalty[13].

As set out above in voluntary requests, interviews with suspects in relation to use of criminal powers would only be conducted in accordance with the relevant Code of Practice issued under the Police and Criminal Evidence Act 1984 (PACE)[14] . Please see our Prosecution Policy for more information about our approach to our criminal investigations.

Inspections – section 73 of PA04

These powers allow us to enter relevant premises and conduct an inspection for the purpose of investigating whether pensions legislation has been complied with, or in connection with an avoidance investigation (ie where we are considering the issuance of a Financial Support Direction (FSD) under s43 PA04 or a Contribution Notice (CN) under s.38 PA04).

Failure to comply with an inspection, or preventing or hindering an inspector, may lead to penalties and/or criminal prosecution (see further below).

We will only conduct an inspection when we consider it to be a reasonable and proportionate way of obtaining the relevant information needed to progress a case. We will usually give reasonable notice of an inspection before a visit takes place. This will enable the relevant information and records to be prepared in advance and enable the inspection to take place quickly and effectively, causing minimum disruption to the person or business.

If a person is unable to attend the premises at the specified date and time, they must contact us as soon as possible to request an alternative time. We will usually agree to reasonable and justifiable requests.

However, there may be occasions where we may decide to inspect relevant premises without notice. We may consider this option where we believe that information or documents will be destroyed or altered if we give advance warning of our intention to conduct an inspection (see more on this below).

Warrants – Section 78 of PA03

We may apply to the Magistrates Court for a warrant to access and inspect premises under section 78 of PA04, if they are satisfied by the information we give (provided on oath) that there is a document on those premises where:

  • its production has been required under section 72 or section 75 of PA04 and it has not been produced
  • it could be removed, made inaccessible, hidden tampered with or destroyed
  • an offence has been committed, there will be misappropriation of scheme assets, a person is liable to pay a penalty[15], or a person is liable to be prohibited from being a trustee[16]

A warrant can be executed by an inspector (accompanied by anyone they consider appropriate) for a period of up to one month from the date on which it is issued to enter and search the premises, using reasonable force if necessary, and to:

  • take possession of a document or take such steps as necessary to preserve it or prevent interference with it
  • take copies of any document
  • require a person named in the warrant to explain or state where the document may be found

in the case of electronic documents, require it to be produced in a form which can be taken away

All documents must be relevant to the exercise of our functions[17].

Any document we take into our possession in these circumstances may be retained by us for a period of 12 months from the date it was obtained.

Before the retention period expires we can apply to the Determinations Panel to extend it (or any extension of it that may already have been granted) by up to 12 months. This would apply where the document is considered relevant to any criminal proceedings that begin before the end of the retention period, until the proceedings conclude. In any event, we may retain copies of any document in connection with the exercise of our functions.

Non-compliance with our information gathering powers

If a person fails to comply with our information gathering powers, we have a range of enforcement options available, including financial penalties and criminal prosecution. You can read more about our approach when we have this choice in our Overlapping powers policy.

Financial penalties

These may apply if a person issued with:

  • an Information Notice issued under s72 of PA04 fails to produce all of the information and / or documents specified in the notice
  • an interview notice issued under section 72A of PA04, fails to arrange or attend for interview

Or a person

  • prevents or hinders an inspector conducting an inspection under s73, s74, or s75 of PA04
  • fails to comply with a requirement made by an inspector under s75 of PA04, during the course of an inspection

Fixed penalty notice (FPN)

FPNs may be issued under s77A(1) of PA04 when there has been a failure to comply with:

  • a statutory notice issued under s72, s72A, s73, s74 or
  • a requirement given by an inspector under s75 of PA04

or there is sufficient evidence that a breach has been committed that allows the immediate issue of an FPN.

The FPN is for a fixed amount of money set by regulations (currently £400), which needs to be paid by a specified date at least 28 days after the notice is issued. The FPN states the failure to which it relates and the relevant time period for compliance. It also states the right to request a review of the notice under section 43 of the Pensions Act 2008 (PA08) and the right of referral to a tribunal under section 44 of the PA08. Where the FPN relates to a failure under s72 or s72A, it also notifies the person that we may issue an escalating penalty notice if they continue to fail to comply.

Escalating penalty notice (EPN)

Where the non-compliance continues:

  • following a statutory notice for information and/or documents, issued under s72 of PA04, and information is still outstanding
  • following a statutory notice to attend for interview, issued under s72A of PA04, and the person fails to attend the interview or fails to answer questions at the interview

and in each case, after the deadline set out in the FPN, we will usually issue an EPN under section 77B(1) of PA04.

Escalating penalties accrue at a daily rate set out in the table below with the sum dependent on whether the failure to comply is by an individual. In the first column of the table, day 1 is the day specified in the EPN as being the date from which the escalating penalty is payable, and subsequent days are numbered accordingly.

The amount payable is the total of the daily rate for that day and any unpaid penalties due in respect of previous days at the relevant daily rates.

If the person fails to pay a financial penalty and remedy the breach, in certain circumstances we may consider further action in relation to wilful non-compliance which may ultimately lead to prosecution.

Table 4: Failure to comply by an individual

Penalty Type Rate (£)
Fixed penalty £400
Escalating penalty Prescribed daily rate £200

Table 5: Failure to comply by a person other than an individual

Penalty Type rate (£)
Fixed penalty £400
Escalating penalty Prescribed daily rate (see Table 6 below)

Table 6: Prescribed daily rate

Day Daily rate
1 £500
2 £1,000
3 £1,500
4 £2,000
5 £2,500
6 £3,000
7 £3,500
8 £4,000
9 £4,500
10 £5,000
11 £5,500
12 £6,000
13 £6,500
14 £7,000
15 £7,500
16 £8,000
17 £8,500
18 £9,000
19 £9,500
20 £10,000
Each subsequent day  £10,000

Criminal prosecution

We may consider that, in the absence of a reasonable excuse, a criminal offence has been committed. This may lead to a criminal prosecution under s77 of PA04.

We may prosecute where a person:

  • neglects or refuses to comply with a request for information made under s72 of the 2004 Act
  • intentionally delays or obstructs an inspector
  • neglects or refuses to produce documents, answer questions or provide information required during an inspection
  • intentionally and without reasonable excuse alters, suppresses, conceals or destroys any document which is liable to be required to be produced under s72 or s75 of the PA04

In addition, under s80 of the PA04, it is a criminal offence to knowingly or recklessly provide information to us that is false or misleading, when it is:

  • given in compliance with a requirement to give us information
  • given in circumstances where it is reasonable to expect or know that we will rely upon it for the purpose of exercising its functions under the PA04 or the PA95

Where we decide that a criminal prosecution may be appropriate we will assess the case in accordance with our Prosecution Policy.

Footnotes for this section

  • [12] PACE Code C and Code E as relevant.
  • [13] s310 of PA04 - unless evidence relating to it is adduced, or a question relating to it is asked, in the relevant proceedings by or on behalf of that person.
  • [14] PACE Code C and Code E as relevant.
  • [15] Under s10 of PA95, or s168(4) of the Pension Schemes Act 1993 (but excluding a penalty under s10 PA95 that might arise out of failure to comply with under subsection (3) of section 238 of PA04 (information and advice to employees) or under regulations issued under subsection (4) of section 238 of PA04).
  • [16] Under s3 of PA95, including as it applies by virtue of Paragraph 1 of Schedule 1 to the Welfare Reform and Pensions Act 1999 (stakeholder schemes).
  • [17] Excluding documents which are relevant to whether a person has complied with obligations imposed under subsection (3) of section 238 of PA04 (information and advice to employees) or under regulations issued under subsection (4) of section 238 of PA04, and is not relevant to our functions for any other reason