Compliance and enforcement quarterly bulletin July to September 2019 | The Pensions Regulator Skip to main content

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Compliance and enforcement quarterly bulletin July to September 2019

This quarterly update provides information about our cases and the powers we have used. It is designed to help employers, their advisers, trustees and administrators understand the type of compliance and enforcement interventions we undertake.

Our approach is based on preventing problems developing in the first place by being clear about our expectations, and we have a range of educational materials for all members of our regulated community. These include online resources for employers and their advisers to help them through automatic enrolment (AE), the Trustee toolkit, guidance on scams, and information on other areas including funding and investment, scheme governance and record-keeping.

Compliance

How TPR supervision teams respond quickly to risky events

In the last compliance and enforcement bulletin you’ll have read about how our relationship supervision team is working on developing strong one-to-one relationships with schemes that are of strategic importance to The Pensions Regulator (TPR). In this issue we focus on event supervision and our rapid response and event engagement teams who respond quickly to events which pose increased risks to schemes. The teams operate across defined benefit (DB), defined contribution (DC) and public service pension schemes (PSPS) schemes. This includes corporate restructuring, major transactions, employers in financial distress, and reports indicating poor governance or administration. The teams have worked on around 150 different interventions in the past quarter.

Our interventions can be prompted by market intelligence, whistle-blower reports, actuarial valuations, notifiable events and breaches of law, trustees and advisers, and the Pension Protection Fund.

We consider a number of factors before determining whether and how to engage, focusing on the risks to the scheme and how these fit with our statutory objectives. Where we do engage, our first point of contact is usually through the trustees or scheme manager. We seek to establish how trustees are assessing and responding to the event which we have identified, offer recommendations where needed and expect them (and their advisers) to take that guidance into account. Where required we will engage more directly with the scheme employers and/or other relevant stakeholders.

Employers should expect us to engage early where significant corporate events occur which have the potential to cause material detriment to the scheme.

In the context of fast-moving corporate situations trustees can expect us to actively engage with them and to offer support when evaluating proposals relating to their schemes. Engagement works best, as the case study below demonstrates, where all parties involve us early in their negotiations and work cooperatively. This approach ensures that trustees test the employer’s proposals rigorously.

Case study

This UK employer with an international parent company announced it was closing its UK operations. On the day of the closure announcement we contacted the trustees to request information for our initial assessment of the situation, and within five business days of our initial contact we held a call with the trustees and their advisers.

Our discussions with trustees on the call, and in subsequent meetings, focussed on the package of proposals offered by the parent company. These proposals were conditional on the trustees agreeing to enter into a legally enforceable memorandum of understanding (MOU) within one month. Working with the trustees we challenged the proposals, and tested the tight timeline set for the agreement of the MOU, while supporting the trustees in moving forward with the negotiations as rapidly as possible.

We also gave feedback to the trustees on a number of technical aspects of the proposals with the view of working towards an acceptable outcome. Despite the fluid and fast-moving nature of the discussions we were able to support an agreement between the trustees and the parent company that was concluded within very close to the one-month time frame originally set.

With our input the trustees negotiated robustly to secure a number of improvements to the initial proposals, including an appropriate definition of the basis for funding the scheme to self-sufficiency along with information-sharing commitments to enable them to assess the continuing ability of the guarantor to support the scheme. These improvements to the mitigation and ongoing employer covenant monitoring were in addition to a payment to the scheme to clear the technical provisions deficit, and the guarantee by the overseas parent of all funding obligations of the participating employers in the UK to the scheme.

Message to trustees and employers

Engage with us early and be transparent. We will look to establish that the trustees are appropriately equipped, advised and doing what we would expect, and that employers are sharing adequate and timely information with trustees. Where we do engage more directly we will look to support the trustees through any negotiations to achieve the best outcome for savers.

Enforcement

Failure to respond to s72 notices leads to two prosecutions

This quarter we issued 18 notices under our s72 powers - which require those who receive them to provide us with the information we request. We tend to use these if a scheme (or employer or adviser in the case of automatic enrolment) fails to give us information, where there is a risk that information will be incomplete or not provided in a timely manner, or where we need to obtain information from an advisory firm or financial institution that would otherwise not have been able to provide it due to customer confidentiality. We have also used them in our thematic reviews and regulatory initiatives to help us gather information about a particular risk.

If the person fails to respond to the s72 notice, we may start a prosecution – as we did twice in this quarter. The first was an individual who failed to give us information about his businesses, which we needed in order to investigate their automatic enrolment compliance and pension contribution payments. The second was the director of a trustee company who was asked to provide information about scheme funds that he had invested in another company that he owned. Those we prosecute are tried in a magistrate’s court and may be fined an unlimited amount.

Message to trustees, employers and advisers

If you fail to provide the information we request as part of our investigations, we can use our s72 powers to make you. Don’t wait until we serve you with these notices – make sure you respond to our enquiries with timely and accurate information.

Selected powers used for frontline regulation

Power  Description  Number in period  Number to Sep 2019 
Trustee appointments The power to appoint trustees to schemes (a) to secure that the trustees as a whole have, or exercise, the necessary knowledge and skill for the proper administration of the scheme, (b) to secure the proper use or application of the assets of the scheme, and/or (c) otherwise to protect the interests of the generality of the members of the scheme. 0 55
The power to appoint trustees to schemes to secure that the number of trustees is sufficient for the proper administration of the scheme under section 7(3)(b) of the Pensions Act 1995. 125 2,909
Power to vest or transfer property as a consequence of appointing or removing a trustee under section 9 of the Pensions Act 1995. 0 28
Trustee suspensions The power to suspend a trustee either (a) whilst we are considering making a prohibition order against them, or (b) if proceedings have been issued against them for an offence involving dishonesty or deception, or (c) pending consideration being given to the institution of proceedings for an offence involving dishonesty or deception.
17
Power to extend the period of suspension
0 3
Trustee prohibitions Power to make a prohibition order under section 3 of the Pensions Act 1995.  19
Special Procedure Where TPR considers that there would be an immediate risk to members’ interests or scheme assets if a warning notice were to be issued. 0 31 
Mandatory penalty notice The Occupational Pension Schemes (Charges and Governance) Regulations 2015 require us to issue a mandatory penalty where no chair’s statement has been prepared or we are of the opinion that the statement does not comply with the requirements prescribed for a chair’s statement in the Occupational Pension Schemes (Scheme Administration) Regulations 1996. 34 602
Scheme return enforcement Trustees have a legal obligation to give us information about their pension scheme by completing a scheme return when required, and an ongoing duty to ensure our records are maintained with up-to-date registrable information. A financial penalty under section 10 of the Pensions Act 1995 may be imposed for this failing. 26 227
Audited accounts enforcement Trustees or scheme managers of most schemes are legally required to obtain audited accounts annually, within seven months of the scheme year end. Failure to do so may result in a financial penalty. 0 4
Information gathering Our formal information gathering powers under section 72 of the Pensions Act 2004. 18  703

 

Power  Description  Number in period  Number to Jun 2019 
Regulatory intervention reports Section 89 of the Pensions Act 2004 gives us the power to publish information on cases where we have exercised or considered exercising our powers. 58 
Clearance
A statement that we will not use our anti-avoidance powers to issue either contribution notices or financial support directions in relation to a defined benefit occupational pension scheme.  0 57
Inspection and warrants
Statutory inspection powers under Section 73 to 78 of the Pensions Act 2004. 0 6
Production order A High Court Order under Section 345 of the Proceeds of Crime Act 2002 requiring the production of specified material.  1 28
Provision of information by interested party. Section18(A) Proceeds of Crime Act 2002. 0 0
Restitution order  A High Court Order under Section 16 of the Pensions Act 2004 requiring a person to put right a misuse or misappropriation of pension scheme assets in which they were involved.  0 4
Restraint order A High Court Order under Section 41(1) of the Proceeds of Crime Act 2002 requiring the restraint of assets.  0 2
Criminal  Fraud by Abuse of Position under Section 4 of the Fraud Act 2006.  5
Restriction on Employer Related Investments under Section 40 of the Pensions Act 1995. 0 2
Improvement/third party notice  Notices containing directions for a person to take steps to enable compliance with pensions legislation or remedy any non-compliance.  17
Regulated apportionment arrangement The application, subject to conditions, to separate a scheme from its employer. It must be approved by us and the PPF must confirm that they do not object to the RAA. 0
Master trusts  Master Trusts authorised under section 13 of the Pension Schemes Act 2017. 21 31
Other Various other powers  30 138
Total 259 4,953

Review of statutory notices for frontline regulation

If a trustee or other recipient disagrees with the issuing of a Statutory Notice issued under the 2015 Regulations – for example for failing to prepare a chair’s statement or exceeding the charge cap – they can apply for a ‘review’ of that decision. We set out the right of review in all notices, as well as how to apply for a review. An application for a review must be made within 28 days from when the notice was first issued.

We appoint a review officer, who is someone not previously involved with the case, to carry out the review. We will usually complete the review within 10 working days of the written notification that the application has been accepted and that a review will be carried out. If this is not possible, we will contact the applicant(s) and let them know when they can expect us to make a decision.

Reviews  Number in period  Number to Sep 2019 
Requested 2 142 
Completed 136

 

Outcome of reviews  Number in period  Number to Sep 2019 
Confirmed 30
Revoked, substituted or varied 98

Automatic enrolment

Re-enrolment deadlines approach for small and micro employers

Over the coming months we will see the first waves of the small and micro employers reach their re-enrolment deadlines. Re-enrolment means staff who opted out of their workplace pension are automatically put back in by their employer every three years. It’s an important task because it means these staff are reminded that they need to start saving for their retirement and reflects the employer’s ongoing duties.

For the small minority of staff - around 9% - who opted out, re-enrolment means they also have the opportunity to benefit from the employer pensions contributions to which they are entitled.

So far, around 254,000 employers have completed re-enrolment. It’s a straightforward task and employers will receive a communication from us reminding them about their re-enrolment responsibilities. Those who fail to re-enrol and/or re-declare (ie confirm to us that they have completed re-enrolment – a re-declaration of compliance must be completed whether any staff were re-enrolled or not) may incur statutory penalties in the same way as those who commit other AE failures.

AE inspections for UK’s largest employers

This quarter we’ve also been carrying out inspections among the UK’s largest employers – those who were the first to go through the new AE process seven years ago. The aim of these checks has been to monitor ongoing compliance, understand the risks and issues that might affect future compliance by this important group of employers, and understand the operational capabilities of the schemes. Our inspections covered the following areas:

  • Ensuring good policy, processes and practical steps are taken to assess new and existing workers.
  • Ensuring good practice for re-enrolment.
  • Assessing compliance and communication of recent contribution increases.
  • Checking the systems and processes used for calculating all ongoing contributions.
  • Understanding any actual or potential risks to compliance.

Case study

We carried out an inspection with this large retailer, which is also in relationship supervision for its defined benefit scheme. At the site visit we established that this employer showed a high level of AE compliance and worked well with third parties to process both their payroll and their pension administration, covering around 150,000 savers.

However, we also identified a few areas for concern, which included some inadequate staff communications, problems with some new starter data, and technical process failings. We gave feedback to the employer at the meeting, both on what was working well and where they needed to improve. We followed this up with some further communications, where the employer committed to make some process changes to achieve full compliance.

Message to employers

Whether you employ five or five thousand staff, you need to be compliant with all your automatic enrolment duties. Our inspection teams visit employers of all sizes, all over the country, so make sure you’re meeting your legal duties as we could be knocking at your door next.

Cases closed 

Automatic enrolment cases closed in the period 
Cases closed in this quarter 20,190
Cases closed to date[1] 319,720

Selected powers[2] used in the period

Power  Number in period  Number to Sep 19 
Information notice 110 1,069
Inspection 67  1,768
Warrant 4
Compliance Notice 11,202  170,544
Unpaid Contributions Notice 12,384 45,074
Fixed Penalty Notice 6,776 94,085
Escalating Penalty Notice 2,848 26,938 
Total 33,387 339,482 

Review of statutory notices for automatic enrolment

A review is where an employer who is the recipient of a statutory notice (such as a Compliance Notice, Fixed Penalty Notice or Escalating Penalty Notice) disagrees with our decision and requests a review.

Confirmed reviews are where we have carried out a review and decided that the statutory notice was issued correctly and appropriately, and will continue to be applied to the employer. In some cases, we revoke the statutory notice following the review. Where a notice is substituted, this may mean that a different breach has been uncovered and a different statutory power is used instead.

Reviews[3]  Number in period  Number to Sep 19 
Requested 2,310 33,106
Completed 1,821 27,100

 

Outcome of reviews  Number in period  Number to Sep 19 
Confirmed  514 7,292
Revoked, substituted or varied 1,307 19,808 

Tribunals for automatic enrolment

Employers who receive a penalty notice and disagree with our decision to issue it must first ask us for a review. If they disagree with the outcome of that review they can then appeal the decision to the Tribunal Service. Employers have 28 days after the review decision is issued in which to appeal.

Tribunals  Number in period  Number to Sep 19 
Requested  130 1,630
Defended 49 993
Not defended
66 622

 

Outcome of defended tribunals  Number in period  Number to Sep 19 
Confirmed[4] 54  855
Revoked, substituted or varied
7 53
Total 61 908 

Ongoing tribunals where the decision has yet to be made on how to respond: 16

Defended tribunals still ongoing at the end of September 2019: 85

Online list of employer and trustee fines

We publish details of those who have received penalties either for:

  • not completing a chair’s statement on time
  • not completing a scheme return
  • remaining non-compliant after paying an escalating penalty notice (EPN)
  • an unpaid EPN leading to a county court judgement (CCJ)

We publish enough information to identify:

  • the name and area of those who have been fined
  • the amount they need to pay to us

Footnotes

  • [1] We define ‘to date’ as the period commencing from the outset of our compliance and enforcement activity for automatic enrolment (July 2012), and continuing all the way to the end of this reporting period (ie 30 September 2019). We occasionally identify a small number of cases which have been incorrectly marked as relating to automatic enrolment. When this occurs, an adjustment to the numbers from the previous quarter will have been made.
  • [2] This report only provides data on the main powers that we anticipate using. Our annual commentary and analysis publication on automatic enrolment will provide data on any other powers we have used over the period.
  • [3]  Note that the above numbers represent the number of statutory notices that have been subject to a review request from an employer. The reviews completed in the period may not have been requested in the period. The numbers are subject to change over time as powers issued in a previous period are subsequently replaced as part of ongoing enforcement activity.
  • [4] Confirmed includes Struck out, Dismissed, plus Withdrawn.