The pandemic has shown that the Pensions Regulator wants to give direction to employers and to schemes. This can be helpful, but is it also a sign of a more interventionist approach? The Pensions Regulator has a new Enforcement team and is preparing for stronger powers from Parliament. What should you look out for as an employer, a trustee, or scheme manager?
What do the regulations in the new Pension Schemes Bill mean? The new bill strengthens the power of the Regulator, helping to meet its aim of being clearer, quicker and tougher. Helen Miles and Parminder Latimer discussed in our latest webinar.
- Contribution notices. This is an extension of the Regulator’s current powers to allow a sanction to be imposed when there is a financial obligation on an employer or a person connected to the employer, where there is a deficit in a defined pension scheme. An act or failure to act has caused the Regulator to impose the sanction. Two new tests have also been brought in to help with this: the employer insolvency test and the employer resources test.
- Information gathering. Also extending the Regulator’s current powers, this means employers will need to share information with the Regulator as and when required. This could be summoning employers for interviews or inspecting premises. There is a daily fine of £10,000 for non-compliance with providing information. Speak to a lawyer to discuss what information should or shouldn’t be shared with the Regulator.
- New criminal sanctions. This applies to any avoidance of employer debt by any person without reasonable excuse, trying to avoid recovery of all or part of a debt. This person could be liable for a fine or imprisonment of up to seven years. More guidance is yet to be released on what would be a reasonable excuse for actions.
- The Regulator’s Enforcement Team will use their statutory information-gathering powers more often. Be prepared to respond promptly – remembering that it may take time for you to get the information you need to satisfy their requests.
- Good record keeping is essential. Ensure you have all your professional advice confirmed in writing. Remember that privilege can be claimed only in respect of legal advice, even for highly confidential and commercially-sensitive issues.
- The Regulator will be continuing to look at the payment of dividends when an employer has a deficit in its pension debts. If you are unsure of where you stand with this, get legal advice to scrutinise dividend payments before they are paid out.
- Employers should get trustees involved in discussions as early as possible, to work collaboratively. Legally-binding information sharing protocols, and confidentiality agreements will support this in practice.
We await the new combined code of practice and publication on enforcement activity from the Regulator including case reports. Watch this space!
If you have any further questions or want to discuss this topic in more detail feel free to contact the presenters using the details on their profiles below:
Helen Miles, Pensions Partner
Parminder Latimer, Pensions Partner