NEWS   |    June 17, 2024

Is the Pensions Regulator Watching Your Scheme?

The Pensions Regulator is increasingly using its criminal powers

There has been much debate as to how, and if, The Pensions Regulator (“TPR”) will use its criminal powers, which have been expanded over recent years. We have seen recent examples where TPR has used its powers, which may help inform the debate on where it is focusing its use of such powers currently.

In one case a few weeks ago, TPR used its criminal powers against a former company director of 1066 Target Sports Limited. The former company director admitted to intentionally and without reasonable excuse withholding documents from TPR, which the former company director was required to provide. The former company director has now been ordered to pay £15,000 for failing to provide information to TPR.

The TPR power to compel trustees, employers, advisers or anyone it knows holds, or is likely to hold, information in respect of its investigation is becoming an increasingly used tool in TPR’s investigations. It gives TPR the power to seek information, but also hold people accountable where they will not co-operate with TPR.

In respect of this case, TPR has said that its attempts to use its civil powers were ignored. This meant that TPR had to consider its criminal powers. This case sends a clear warning that TPR will not hesitate to prosecute companies or individuals who refuse to give it the right information when requested and/or try to frustrate its aim to protect pension savers. So, there is a clear policy aim of holding people and companies that breach TPR’s use of its information gathering powers accountable.

What are TPR’s criminal powers?

The Pension Schemes Act 2021 introduced new criminal offences relating to defined benefit (“DB”) pension schemes. These include:

• the avoidance of a statutory section 75 debt;
• conduct risking accrued scheme benefits; and
• failure to comply with a contribution notice.

The first two of these offences were the most concerning when they were introduced. This is because they apply to any person, which means that they can apply very widely and, if found guilty, a person can be imprisoned for up to seven years and/or have an unlimited fine imposed on them.

There are defences available to each of these criminal offences, such as reasonable excuse. Although reasonable excuse is not defined in the Act, TPR has helpfully produced guidance on this defence.

The intention of these criminal powers is not for TPR to prosecute ordinary commercial activity but to investigate intentional or reckless activities. This seems consistent with the recent TPR activity.

What can you do?

Although it is for TPR to establish that a person does not have reasonable excuse, you can (and arguably should) take steps to be able to demonstrate that you do have reasonable excuse. This should include documentary evidence and records to demonstrate that you have fully considered any DB pension scheme related situation and have justifiable commercial reasons for any (in)actions taken. For example, you should ensure that you have good quality, contemporaneous records and minutes of decisions taken in relation to any DB pension scheme, consider mitigation if there is any detrimental impact on a DB pension scheme due to your (in)actions, obtain external legal advice to help you navigate through these tricky pension waters, and potentially engage with TPR proactively.

It is best to be keeping these points front of mind when handling difficult decision-making with a DB pension scheme, anticipating where queries might arise. After all, it might not be immediately visible but TPR could be watching your scheme already.

The views in this article are intended for general information purposes only and should not be used as a substitute for professional advice. Arc Pensions Law and the author(s) are not responsible for any direct or indirect result arising from any reliance placed on content, including any loss, and exclude liability to the full extent. Always seek appropriate legal advice from a suitably qualified lawyer before taking, or avoiding taking, any action. If you have any questions on the points raised in the above, please do not hesitate to get in touch.

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