Trustees must produce a chair's statement which is compliant with the law, The Pensions Regulator (TPR) has warned after fines against two schemes were upheld in court.
In separate cases, trustees failed to include the required information in their annual statement and were issued fines by TPR. Trustees appealed the decisions to the First-Tier Tribunal.
The judges on both tribunal cases agreed that penalties for non-compliance were mandatory, the chair's statements were non-compliant with the law and TPR was right to issue the fines.
Nicola Parish, Executive Director for Frontline Regulation at TPR, said: “Annual chair's statements are an essential way to show pension savers that their scheme is being properly governed and will deliver the retirement benefits they are promised. That’s why it is the law for trustees to produce chair's statements and make sure they contain all of the necessary information.
“We are pleased that the judges in these cases agreed that under legislation, a mandatory penalty applies to chair's statements which are not compliant.
“As these cases clearly demonstrate, we are prepared to defend our penalties in court.
“We continue to expect high standards of trustees and will take action when chair's statements are not compliant with the law.”
In the case brought by EC2, trustee of Autoenrolment.co.uk, judge David Hunter QC ruled that the chair's statement for 2015/16 was “deficient in five respects”. TPR fined the scheme trustee £2,000 for the breach, which was upheld.
The judge said the requirements stated schemes should not simply prepare an annual governance statement, but “prepare a statement containing a considerable amount of clearly specified and detailed information”.
The case brought by trustees of the Moore Stephens Master Trust was upheld by the judge in one of three areas which were deemed by TPR to be non-compliant and the fine was reduced from £2,000 to £500. The chair's statement was for the scheme’s 2016/17 year.
The judge ruled that as the scheme was a master trust with a professional trustee, and ran schemes for multiple employers, that “some penalty” for the failure was “therefore appropriate”.
TPR provides detailed guidance about producing a chair's statement, including a quick guide to the chair's statement (PDF, 71KB, 16 pages).
Notes for editors
- Occupational schemes providing money purchase benefits, other than those arising from additional voluntary contributions (AVCs), are required by law to prepare an annual statement, signed by the chair of the trustees, within seven months of the end of each scheme year.
- Professional trustees are expected to meet a higher standard of care and to demonstrate a greater level of knowledge and understanding than other trustees.
- TPR fined the trustees of Moore Stephens Master Trust after finding its chair's statement to be non-compliant in three areas. First-Tier Tribunal judge David Thomas found that the chair's statement did not satisfy the requirements in one aspect (encouragement of members to express their views to trustees) but was compliant in the other two (trustee knowledge and understanding and core financial transactions). He reduced the fine from £2,000 to £500 (the statutory minimum).
- TPR fined EC2 Master Limited, trustee of Autoenrolment.co.uk £2,000 after finding its chair's statement non-compliant in five areas: failing to include the latest default statement of investment principles; failing to provide the date of the last review of the default statement of investment principles; failing to adequately describe how trustee knowledge and understanding was met during the scheme year and enables to properly exercise their functions as trustees or managers of the scheme; failing to include information about how the requirement for the majority of trustees and the chair to be non-affiliated were met; and provide details of how members were encouraged to share their views and how they were represented. First-Tier Tribunal judge David Hunter QC upheld the penalty imposed by TPR.
- 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).