The trustees of an international airline’s pension scheme have been fined by The Pensions Regulator (TPR) for failing to get accounts audited on time for two years in a row.
Four of Pakistan International Airlines Retirement and Death Benefits Plan’s trustees have been fined £500 each. The requirements were not met by the deadline in either 2015 or 2016 and no reasonable excuse was given.
Trustees or scheme managers of most pension schemes are legally required to obtain audited accounts and an auditor’s statement about contributions every year.
It is the first time that TPR has used its fining power under section 10 of the Pensions Act 1995 to enforce against a scheme for this type of governance failure.
The decision (PDF, 122kb, 12 pages) was made by TPR’s Determinations Panel, which found that the trustees had treated their obligations as a “low priority”, even after the scheme’s actuary highlighted the problem to TPR in a breach of law report in November 2016.
The Determinations Panel agreed that the trustees had “ample time” to redress the breaches and did not give a reasonable excuse for the failures.
Executive Director of Frontline Regulation Nicola Parish said: “We will take action if we believe members’ benefits are at risk from failures in a scheme’s governance and administration. Obtaining audited annual scheme accounts is a statutory requirement and a fundamental aspect of good governance.
“Failure to obtain audited accounts can hinder a scheme’s ability to obtain a valuation and can also be an indication of wider governance failings.
“This case, and the first use of our section 10 power to enforce against breaches of this nature, is in line with our clearer, quicker and tougher approach. We will make full use of the powers available to us.”
TPR is working to raise the standards of governance with trustees and those responsible for running schemes, including through its 21st Century Trusteeship work.
- On 23 November 2016 the scheme actuary submitted a breach of law report to TPR, notifying the regulator that the trustees had not obtained audited reports or an auditor’s statement about contributions for the scheme years ending 5 April 2015 and 5 April 2016. Regulations require them to be obtained within seven months of the end of the scheme year.
- After attempting to engage with the trustee board, on 30 August 2017 a warning notice was issued to the trustees outlining TPR’s intention to pursue penalties under section 10 of the Pensions Act 1995. The warning notice invited representations from the directly affected parties and indicated that the matter would not be referred to the Determinations Panel if the breach was rectified within two weeks.
- Although copies of the 2015 accounts were received, the 2016 accounts remained outstanding without reasonable excuse until after the determination notice was issued. As a result TPR referred the matter to the Determinations Panel recommending a penalty of £500 per trustee.
- The Determinations Panel imposed a fine of £500 per trustee, in line with the approach set out in TPR’s monetary penalty.
- The Determinations Panel is a committee of TPR. It operates separately from other parts of the organisation, including TPR’s case teams. The Panel has a separately appointed membership and separate legal support. This enables it to make independent and impartial decisions. The Panel considers all the evidence before it and provides each party with reasonable opportunity to present their case. Members of the Panel are not involved in the investigation process.
- 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; 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).