Greater enforcement powers proposed for TPR

Greater enforcement powers proposed for TPR

Civil fines of up to £1 million could be leviable and criminal prosecutions brought against pension schemes and their bosses under proposals intended to strengthen the powers of The Pensions Regulator (TPR).

The Department of Work and Pensions has issued a consultation proposing the increased powers following the threats posed by the high-profile collapses of Carillion and BHS to their corporate defined benefit pension schemes.

“These powers are intended to make it easier for the regulator to intervene when employers or trustees do not comply with statutory obligations or when employers (or those associated or connected with them) are avoiding their pension liabilities,” the consultation document explains.

TPR can currently issue civil fines of up to £5,000 for individuals and £50,000 for corporate entities for a range of offences.

Under the proposals, the current fines will be maintained for “low-level non-compliance”, and the new civil penalty of up to £1 million will be introduced to give TPR the flexibility to deal more severely with a range of further breaches, such as deliberately providing false information or failing to keep trustees informed.

New criminal offences would punish wilful or grossly reckless behaviour in relation to a defined benefit pension scheme, non-compliance with a contribution notice and failure to comply with the notifiable events framework.

“This will give the criminal courts the power to impose further penalties. These could include a further tier of unlimited fines and/or custodial sentences. We intend these sanctions to be used in the most serious of cases of wrongdoing, where the regulator decides that it is appropriate to bring a prosecution.”

Work and pensions minister Esther McVey said in her foreword for the consultation: “For the vast majority of responsible employers who are already engaging effectively with their trustees, the impact of these changes and new requirements is likely to be limited. However, for the small number of employers evading their obligations, we are putting in place stronger powers so that The Pensions Regulator can intervene more effectively to protect individuals’ pension rights.”

Alistair Russell-Smith, head of corporate defined benefits at Hymans Robertson, warned against holding up stronger powers for TPR as “a cure all for the industry”.

“Some of the changes proposed may be easy to implement, such as stronger rules and powers, but we have to be careful this doesn’t give false comfort that it’s ‘job done’. Real success hinges on the softer things, such as behaviours, confidence and ultimately the appetite for TPR to act.  These will almost certainly prove harder to change but we cannot risk diverting focus away from the issues before there is sustainable change in behaviours.”

Russell-Smith went on to say that the government needs to reflect on TPR’s “irreconcilable objectives” to promote sustainable economic growth and protect pension schemes and the Pension Protection Fund.

He said: “Carillion, BHS and Tata Steel have swung the legislative pendulum heavily towards protecting members. However, any sluggish economic performance in the future would swing this pendulum back to protecting business growth and tax revenues. Both the industry and regulators need consistency across economic cycles, especially when dealing with multi-decade pension issues.”

“Frankly, it’s simply impossible to say if current powers are sufficient because they just haven’t been used enough. There’s no point in having sharper teeth if you’re reluctant to bite.”

The consultation is scheduled to close 21 August.

Categories: News, UK Pensions

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