With the Pension Schemes Bill on its way in “late Spring”, now might be a good time for trustees to take stock of their trustee agendas and to brush off some items that may have been left to gather dust. A recent Pensions Ombudsman determination serves as a useful reminder that, for most schemes, GMP equalisation is not yet done and dusted.
It is just over a year since The Pensions Regulator’s (TPR) general code of practice came into force. In the last year, our clients have made good progress towards compliance, with trustees working with internal teams and external advisers to review and update their practices and procedures, and to ensure that these are documented, leading to strengthened governance frameworks.
Many schemes have a year-end date of 31 March or 5 April, meaning that trustees of these schemes now have 12 months until the date on which the first Own Risk Assessment (ORA) must be carried out in spring 2026.
As a reminder, an ORA must be carried out if a scheme has more than 100 members. It is an assessment of how well a scheme’s Effective System of Governance (ESOG) is working and the way that potential risks are managed. The ORA must be documented. In our latest video, commemorating the first birthday of the general code coming into force, my colleague Matthew Giles suggests that trustees should count backwards from the date of their first ORA, to ensure that compliance plans are on track. Trustees should rework their timetable if there have been any changes of circumstances since it was first formulated.
If progress has slowed, try to identify why this has happened. Is there a weak link in the chain? Have all advisers delivered what they promised? Is the pensions manager overloaded with other priority work? Try to agree sensible timescales for progress, or consider reallocating the work.
Changes to the scheme, or to key personnel involved in the running of the scheme, will result in different risks emerging. Trustees should reassess their governance needs to make sure that the ESOG remains proportionate to the size, nature, scale and complexity of the scheme’s activities and takes account of the specific circumstances that the scheme faces.
Many schemes are still on the pathway to making sure their scheme’s ESOG complies with the general code. The next step is to plan for the first ORA. Start considering how the ORA will be carried out and by whom. The ORA should be seen as a good opportunity to challenge how the scheme functions and there will be learnings along the way.
After the first ORA has been undertaken, trustees need to consider how this fits into “business as usual” arrangements (rather than a one-off “compliance project”). ORAs do not have to be repeated at set points in time, but all elements must be completed within a three year cycle. Trustees can plan the scheme’s subsequent ORA in a way that best aligns with their objectives and key scheme activities. For some schemes, the ORA may look like a continuous assessment, with elements being separated out over the three year cycle – others may set aside a dedicated period of a few months to undertake all aspects of the ORA. It is important to remember that any material changes to the scheme’s ESOG or risk profile also triggers the need for a reassessment.
If your scheme is on a 12 months countdown to its first ORA, does the outstanding work feel manageable? I am happy to have a chat with any trustees who need some guidance.
Part one of this blog covered the new requirement for company directors (including trustee directors) and persons with significant control to verify their identity with Companies House. They will be able to do this voluntarily from 25 March 2025 (the week during which national cocktail-making day, national cleaning week and international waffle day will be celebrated in the US). This requirement is part of measures introduced under the Economic Crime and Corporate Transparency Act 2023 (ECCTA). But are these measures proportionate? Surely there can’t be that many companies in England and Wales registered for fraudulent purposes?
In 2023, the BBC reported that between June and September of that year alone, over 80 companies had been set up using the residential addresses of unsuspecting people living in the same street in Essex. Experts speculated that these companies had been registered in order to launder money or to take out bank loans before closing down the companies and disappearing.
In another case in March 2024, one individual managed to file 800 false documents at Companies House in a short space of time, which recorded the false satisfaction of charges registered by lenders against a total of 190 different companies. Having an accurate register of charges at Companies House is important because it governs the order of priority of payment of debts and, if a company is in financial difficulties, it influences the route by which administrators are appointed and to whom notice must be given.
Meanwhile, Tax Policy Associates, a not for profit company, has published details of its many investigations into fraudulent entities that have been able to set up and use UK registered companies as cover. The investigations it has carried out provide a fascinating insight into the magnitude of the problem. In a few quick steps, Tax Policy Associates demonstrates on its website how it was able to identify a £100 trillion fake company registered at Companies House. It has also highlighted a new scam letter being sent to directors of newly incorporated UK companies from “Company Registry” requiring them to pay a fee, which is one of the ways in which your personal data, published by Companies House, is being used by criminals.
If all this talk of fraud, and the ready availability of personal data filed at Companies House, is making you feel a bit uncomfortable then there is some potentially good news.
What will you be doing during the third week of March? According to a US website, there will be various celebrations underway. Perhaps you will be making the most of national cocktail-making day, or maybe national cleaning week will grab your attention. (Although, on a personal note, I am happy to say that it is not national cleaning week in the UK.) While reading through the possible celebrations (and the list is endless), international waffle day rather caught my eye.
If you are a director of a corporate trustee, however, you might be creating, or logging into, your GOV.UK One Login account. *From 25 March, a Companies House timeline indicates that directors of UK registered companies should be able to undertake voluntary verification of their identity. This will become a mandatory requirement during the autumn of 2025. Directors of existing companies, including directors of corporate trustees, will be required to undergo this new identity checking measure as part of their company’s annual confirmation statement. You can find out the date by which your company must submit its annual confirmation statement by heading to the Companies House website and searching against your company’s name.
Given that there is a 14-day window in which to submit an annual confirmation statement, before penalties might be incurred, it makes sense to tackle the verification process well in advance of the deadline. Pensions managers and company secretaries, take note – you never know which trustee directors are going to decide to take a last-minute holiday and head off to the sun (or snow) or worse still, a round the world cruise with no Wi-Fi connection, oblivious to the need to verify their identity before falling foul of the Economic Crime and Corporate Transparency Act 2023 (ECCTA).
One of the hallmarks of the SECURE 2.0 Act of 2022 (SECURE Act 2.0) legislation was to increase participation in retirement plans. On January 10, 2025, the Treasury Department and the IRS came one step closer when they announced the issuance of proposed regulations requiring automatic enrollment for new Code Section 401(k) and 403(b) retirement plans (Proposed Regulations). As background, the SECURE Act 2.0 added Code Section 414A, which provides that a retirement plan will not be qualified unless it satisfies certain automatic enrollment requirements under Code Section 414(w). These requirements:
For the first time since the DOL adopted its Voluntary Fiduciary Correction Program (VFC Program) in 2002, retirement plan sponsors will be able to utilize self–correction as an efficient means to correct their most frequent compliance failures – late transmittals of participant retirement plan contributions and retirement plan loan repayments.
The DOL finalized an update to its VFC Program adding the Self-Correction Component (SCC) for these fiduciary failures and, additionally, finalized an amendment to an existing prohibited transaction exemption (PTE) that provides excise tax relief for transactions that have been self-corrected.
The SCC feature and excise tax relief become effective on March 17, 2025.
I have been pondering the fact that we are coming up to a quarter of the way through the century. When Big Ben chimes in the new year, it will be 2025. How did that happen? And what has changed in the pensions industry so far this millennium?
In recent years, The Pensions Regulator (“TPR”) has been steadfast in enforcing compliance among pension scheme trustees and employers, often issuing penalties for non-compliance. However, recent cases indicate that with a valid reason, it is possible to contest and even overturn penalties. Here, we examine three noteworthy tribunal decisions that shed light on the courts’ willingness to scrutinise TPR’s rigid application of penalties and underscores the importance of fairness and proportionality in regulatory enforcement.
Caldwell v TPR: Flexibility in Exceptional Circumstances
Background
In Caldwell (Trustee of the Smith & Wallace & Co 1988 Pension Plan) v The Pensions Regulator [2024], TPR issued a penalty to Caldwell for failing to prepare a chair’s statement by the required deadline (within seven months of the end of each scheme year). This annual governance statement is mandatory for defined contribution pension schemes, and failure to submit it incurs an automatic fine between £500 and £2,000.
To what extent does your trustee board understand the various ways in which they might be protected if things go wrong and claims are made against them? It is a difficult topic to think about, as no trustee ever wants to be on the receiving end of a claim. If your trustee board has not considered trustee protection for a while, or if there have been changes to the trustee board, it is well worth revisiting this important subject.
Changes within the sponsoring employer can also impact trustee protection. An employer indemnity is commonly used to add a layer of protection to the trustees’ armour. But just how valuable are these protections and what may impact their value? My latest Pensions Life Hack offers some tips. For more information on trustee protection in general, see our Quick Guide.
It’s Yorkshire Day on 1 August and, when I was thinking about this blog, the stereotype of a stingy Yorkshireman came to mind. Not because I think Yorkshire folk are actually stingy. I don’t! I was wondering whether TPR’s powers granted under the Pension Schemes Act 2021 (PSA 21) have made a difference, or whether the government was too stingy with the extra powers that it handed to TPR.
You know the history – in 2018, the government published a White Paper on protecting defined benefit (DB) pensions. This was in response to various high profile audit failures and collapsed businesses. The Work and Pensions Committee, and the late Frank Field, in particular, didn’t think too much of the £1 million financial penalty brought in by the PSA 21. £1 million just wasn’t enough!
