It’s A Fair Challenge! Penalty Decisions Examined

By Zoya Alam on October 3, 2024 Posted in UK Pensions

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.

Employer Indemnities – Will They Work If Push Comes to Shove?

By Philip Sutton on August 11, 2024 Posted in UK Pensions

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.

Is £1 Million Enough?

By Claire Dimmock on August 1, 2024 Posted in UK Pensions

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!

Pensions Dashboards – Thyme Is of the Essence: How to Meet the 8 August 2024 Deadline

By Claire Dimmock on June 27, 2024 Posted in UK Pensions

A key deadline is looming under the 2022 Dashboards Regulations, and it is not your pension scheme’s “connect by” date, nor is it the ultimate statutory connection deadline of 31 October 2026.

Pension schemes have until 8 August 2024 to apply to extend their deadline for connecting to the pensions dashboards infrastructure beyond the statutory deadline of 31 October 2026, if certain criteria is met.

This might be relevant if your scheme is moving towards buyout and you are concerned about your scheme’s ability to meet its own dashboards “connect by” date and the ultimate 31 October 2026 deadline.

Give Me an ‘E’, Give Me an ‘S’, Give Me a ‘G’!

By Claire Dimmock on June 19, 2024 Posted in UK Pensions

Environmental, Social and Governance (ESG) is never out of the news for long. With manifestos from the Lib Dems and Labour containing pledges around pension funds being required to align with the Paris Agreement goals, and the Green Party’s manifesto containing a pledge to require the removal of fossil fuel assets from investment portfolios, now seems like a good time to recap some of the latest ESG developments for pension trustees.

Trustee Protection on Winding Up – Pensions Life Hack

By Anna Tomlinson on June 11, 2024 Posted in UK Pensions

Trustees of many defined benefit pension schemes are accelerating moves towards buyout, aided by recent market improvements. While the immediate focus may be on completing the buyout, trustees should plan ahead for the scheme wind up and consider how they will be protected if existing exoneration and indemnity provisions fall away. Trustees will want to protect themselves from the risk of personal liability (on a “joint and several” basis) if future claims are made. This can be a difficult area to discuss (no-one wants to get anything wrong, after all) – but it is best to fully consider trustee protection at an early stage.

In my Pensions Life Hack I offer my tips around trustee protection on scheme wind up.

The General Code in Bite-Sized Chunks – Proportionality for Schemes in the “End Game”

By Patricia Bailey on May 28, 2024 Posted in UK Pensions

Many pension scheme trustees and employers aspire to undertake a risk transfer transaction, typically an insurance company buy-out for defined benefit (DB) schemes or a transfer to a master trust for defined contribution (DC) schemes. In each case, this will ultimately herald the termination of the pension scheme and an end to all governance systems. Recent improvements in scheme funding mean that some DB schemes are reaching that point earlier than expected. For example, what could have been a five-year path to buy-out may now be a two-to-three-year journey plan.

This means that many trustees are now considering to what extent general code compliance needs to be factored into the end game. Does an effective system of governance (ESOG) need to be built regardless? With the first “own risk assessment” (ORA) not due until Spring 2026 (at the earliest), what needs to be done in relation to schemes that will have wound-up by then or those nearing the finish line?

Pensions Life Hacks − Alternative Options for Defined Benefit (DB) Risk Transfer

By Victoria Jeacock on May 16, 2024 Posted in UK Pensions

Questions around the “end game” for DB schemes dominate the pensions press at the moment. The amount of tax due on authorised surplus payments to employers reduced from 35% to 25% from 6 April 2024 and we await the outcome of a government consultation on options for DB schemes (which includes changing some of the rules around surplus extraction). Some schemes may be hitting the pause button on derisking plans until further options are considered. For other schemes, derisking plans continue to be firmly on the table, but full buy-out may not be achievable. Over the last few years, there has been an increase in the number of alternative options available for transferring the risks associated with DB Schemes to third parties that may better suit the circumstances of some schemes, their trustees and sponsoring employers. However, these can be complicated and expensive.

In the latest in our Pensions Life Hacks series I consider alternatives to buy-in and buyout and I offer my top tips for trustees who are in the early stages of considering an alternative approach.

The General Code in Bite-Sized Chunks – Counting Members for General Code Compliance Is Definitely Not a Piece of Cake!

By Anna Tomlinson on May 9, 2024 Posted in UK Pensions

Have you ever asked a seemingly straightforward question, only to be met with an answer that starts with “Well, it depends…..”? This can be a touch irritating. However, it may be the first part of the answer given to trustees who ask for advice on what aspects of the Pensions Regulator’s (TPR) general code of practice apply, if the scheme has fewer than 100 members.

By way of background, trustees of schemes with at least 100 members are required to meet specific governance requirements under the 2018 Governance Regulations. This includes the requirement to carry out an Own Risk Assessment (ORA) and to have a remuneration and fee policy in place. The general code covers TPR’s expectations around how governance requirements should be met and a quick search can identify the modules applicable to schemes with at least 100 members. But how do trustees with smaller membership numbers determine whether full compliance is necessary or proportionate? Well, it depends…

The General Code in Bite-Sized Chunks – Proportionality is the Special Ingredient

By Matthew Giles on April 23, 2024 Posted in UK Pensions

Welcome to our new blog series exploring the various ingredients that go into a successful general code of practice compliance programme. We have been cooking up a range of strategies over the last couple of years and are now happy to share our recipe for success!

Background

The general code sets very high standards for pension trustees in terms of the breadth and depth of their governance arrangements. Large, complicated and ongoing schemes will be expected to address each aspect that is relevant to them – there are over 50 elements in total. Thankfully for other schemes there are grounds for trustees to formulate a proportionate approach, taking account of the specific circumstances of their scheme. But what does proportionality look like and in which circumstances might it be available to trustees?

The Original Concept

The 2018 Governance Regulations (which amended the Pensions Act 2004) required The Pensions Regulator (TPR) to develop a code of practice. The regulations set out the key elements that should be included in the code, including the effective system of governance and the own risk assessment. They also specifically provided grounds for proportionality by inserting a new provision into section 249A of the Pensions Act 2004:

“The system of governance must be proportionate to the size, nature, scale and complexity of the activities of the occupational pension scheme.”