Action by The Pensions Regulator (TPR) resulted in fairer treatment of members of a defined benefit (DB) scheme, its latest quarterly report reveals.
The Compliance and Enforcement Bulletin details information about cases and positive outcomes in the last quarter, both as a result of working with schemes to comply with the law and from using enforcement powers.
The anonymous case study details how the DB scheme is now better funded after an upfront payment of £10 million, a reduction in the recovery plan length from 13 to seven years, annual deficit recovery payments of £3.7 million and a commitment to stop dividend payments for six years.
The case is an example of how TPR is taking a tougher approach to scheme funding. It comes after TPR’s clear message in the recent Annual Funding Statement that schemes should be treated fairly, funding targets should be strong, recovery plans should be as short as possible, and dividends should not be paid if an employer is unable to support its pension scheme.
Nicola Parish, Executive Director of Frontline Regulation at TPR, said: “We have clearly set out our expectations for all workplace pension schemes and we will continue to intervene where we have concerns that a DB scheme is not being treated fairly by an employer.
“This is one of many examples of our work with trustees and employers to secure appropriate recovery plans and agree acceptable deficit recovery payments, better protecting the savers in those schemes.”
The Compliance and Enforcement Bulletin also sets out several major achievements by TPR between January and March 2019 as it continues to be clearer, quicker and tougher, including:
- the first fraud conviction
- the same case also resulted in the first conviction for making prohibited Employer Related Investments
- first custodial sentence resulting from TPR prosecution
- the first time we have appointed a trustee to a scheme primarily because of a lack of knowledge among existing board members
- first fine for failing to have three trustees on a master trust board
- highest fine handed by TPR to a trustee, totalling £103,750
In its work on automatic enrolment, TPR saw a 15% increase in the use of powers against employers compared to the previous quarter.
The recent rise is due to an increasing number of employers reaching their three-year re-enrolment date and who must re-declare compliance to TPR, as well as the continued enforcement activity against employers after the first increase of combined minimum contributions in April 2018 to 5%.
TPR takes action against employers who avoid their legal duties, including failing to give eligible staff a pension, ensure the correct amount is contributed into employees’ pension pots, and complete the Declaration of Compliance.
Darren Ryder, Director of Automatic Enrolment at TPR, said: “It is vital that employers meet their automatic enrolment duties to ensure savers receive the income in retirement that they are entitled to.
“This becomes all the more important as minimum contribution levels rise and automatic enrolment matures, meaning people will be saving more towards their pensions.
“As our enforcement action shows, we will be tough on anyone who fails to meet their legal pension duties.”
Notes for editors
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 (PPF); 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).