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£103k fine for corporate professional trustee’s multiple failings

Ref: PN19-18

Issued: Wednesday 8 May 2019

A corporate professional trustee firm has been fined £103,750 for breaching multiple areas of pension law.

The penalty against Link Pension Trustees Limited in relation to failings on the McDonald's Franchisee Pension Scheme is the largest fine handed to trustees by The Pensions Regulator (TPR). The scheme provides pensions for 32 franchisees of the fast food chain but is independent of McDonald's.

Link Pension Trustees Limited was fined £73,750 by TPR’s independent Determinations Panel (DP) for: failing to obtain audited accounts for the scheme for four consecutive years; failing to provide members with Statutory Money Purchase Illustrations (SMPI) for two consecutive years; and failing to report those six breaches of law to TPR.

In its ruling the DP said: “The Panel would have expected better of a corporate professional trustee.”

In separate action arising from the same investigation the trustee of the master trust scheme was also fined £30,000 by TPR for failing to have at least three trustees on a master trust board.

The breaches were identified through TPR’s engagement with all master trust schemes in preparation for authorisation and supervision. It is the first time TPR has used enforcement powers for: failure to provide members with SMPIs; failure to report breaches of law to TPR; and failure to have three trustees on a master trust.

Nicola Parish, Executive Director of Frontline Regulation at TPR, said: “This case highlights how working more closely with master trusts as part of authorisation and supervision will expose any areas where the law is being broken and enable TPR to take action.

“The good governance of pension schemes is closely linked to good outcomes for members, so running a scheme well is essential to ensure pension savers receive the retirement they deserve. We will take action if the long-term protection of savings is put at risk.”

The trustee has resolved the breaches, paid the penalty and the scheme has triggered its exit from the master trust market.

In its ruling in relation to the £73,750 fine, the DP wrote: “Enforcing the obligation to obtain audited scheme accounts is an important way of ensuring member benefits are protected, as it should ensure the assets and liabilities of the scheme are made clear on an annual basis.”

It added: “While the breaches may not have caused identifiable financial detriment to members, they deprived members of information and a level of protection regarding their pension pots.”

The DP ruled that the level of fine was proportionate to the significance, repetition and nature of the breaches and the harm caused and should send a strong message to the regulated community about the importance of statutory obligations.

Notes for editors

1. McDonald's Franchisee Pension Scheme provides pensions for 32 employers who are franchisees of the fast food brand. The scheme is independent from the McDonald's restaurants corporate brand. The scheme has 148 members, of which seven are active and 141 are deferred.

2. As part of an initiative to engage with schemes that fall within the definition of a master trust outlined in the Pension Scheme Act 2017, TPR contacted the scheme on 28 April 2017. The purpose of that engagement was to understand the trustee’s intentions regarding master trust authorisation for the scheme, and in particular, whether the trustee would be applying for authorisation. During this engagement it became apparent that the trustee had failed to comply with a number of its statutory obligations, namely the obligation to obtain audited accounts, the obligation to send SMPIs, and the obligation to report these breaches as soon as reasonably practicable.

3. The Determinations Panel fined Link Pension Trustees Limited:
(a) £25,000 for failing take all necessary steps to secure compliance with the requirement to obtain audited accounts for the Scheme for each of the years ending 5 April 2014, 5 April 2015, 5 April 2016 and 5 April 2017, as required by regulation 2(1) of the Occupational Pension Schemes (Requirement to Obtain Audited Accounts and a Statement from the Auditor) Regulations 1996
(b) £18,750 for failing to provide members with Statutory Money Purchase Illustrations for the Scheme for each of the years 2015 and 2016, as required by regulation 17 of the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013
(c) £30,000 for failing to report breaches of law to TPR as soon as reasonably practicable as required by section 70 of the Pensions Act 2004, in relation to the breaches listed in (a) and (b) above

4. Under separate action from the same engagement, Link Pension Trustees Limited was also fined £30,000 by TPR for failing to have at least three trustees on a master trust as required by Regulation 27(1) of Part V of The Occupational Pension Schemes (Scheme Administration) Regulations 1996.

5. Penalties for breaches of law are imposed either by TPR or by the Determinations Panel if the powers are reserved, as set out in schedule 2 of the Pensions Act 2004. The Panel operates separately from other parts of the organisation, including the case teams, and is not involved in investigating cases.

6. Section 89 of the Pensions Act 2004 gives TPR the power to publish information on cases where powers have been exercised or considered to be exercised.

7. TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of TPR’s functions under Part 3 of the Pensions Act 2004 only).

Press contacts

Kimberly Middleton

Media Officer (DC)
01273 349554

Matt Adams

Senior Media and Parliamentary Manager
01273 662086

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