Partner Anna Copestake comments in Mallowstreet on TPR’s aim to change fines regime re breaches of the annual DC chair’s statement
Since April 2015, chairs of defined contribution schemes have had to submit an annual statement to the regulator giving details on their scheme’s default option, disclosing costs and charges and encouraging members to share their views. But the fact that small omissions cannot just attract a fine but also leave a fund’s reputation damaged for what could be seen as immaterial details has been causing consternation for some time.
The Pensions Regulator is aware of this; in December, its director of policy, analysis and advice David Fairs, said that the regulator intends to speak to government about changing the regime so that only material breaches would attract a fine.
Anna Copestake commented that requiring TPR to only fine trustees for material breaches would be a step in a right direction but questioned whether this would go far enough.
“We might start seeing wrangles around what is a material breach,” she speculated.
Instead, TPR should be given wider discretion, she argued, to allow it to take a more holistic view when deciding if a fine would be appropriate, “for instance based on whether the breach is persistent and any mitigating circumstances”, she said.
Whatever changes might be made to TPR’s powers in this area, “it’s going to be really important that TPR makes clear when it will and won’t fine”, she stressed, as any lack of clarity would lead to “disproportionate” adviser costs and would hardly constitute value for members.
Copestake added that chair’s statements have long since ceased to be a member document, having turned into “a ‘tick box’ exercise of frustrating proportions” instead. To ward off the risk of a fine and any publicity that might go with it, statements have become less and less member friendly, she noted, thus missing their policy objective.
The recent Upper Tribunal decisions about fines that were contested by trustees “were the final nails in the coffin”, she remarked.
She believes that they have also had dangerous unintended consequences from the ensuing publicity.
“A member might spot in the press that their pension scheme has been fined, unaware that it was because of legal technicality. We are at risk of unnecessarily damaging members’ trust,” warned Copestake.
Read Anna’s comments in Mallowstreet.
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