U.K.’s Pensions Regulator getting serious about enforcement

Since then, TPR has ramped up its compliance and enforcement actions. In the courts, it has brought prosecutions against 23 individuals or organizations in 2017-2019 for failure to provide information, willful non-compliance with automatic enrollment duties, and providing false or misleading information to TPR, as well as fraud.

The past 12 months saw the first prosecution for fraud and the first custodial sentence handed down as the result of a TPR investigation: In March, an accountant was sentenced to more than three years in jail after he fraudulently took more than £290,000 (U.S. $367,000) from a pension scheme. In addition, the courts handed down the largest-ever fine following a TPR prosecution. In May, a corporate professional trustee firm, Link Pension Trustees Limited, was fined £103,750 (U.S. $131,380) for failings in its administration of the McDonald’s Franchisee Pension Scheme. There have also been a number of high-profile cases being resolved, including Southern Water agreeing to pay £50 million (U.S. $63.3 million) into its pension scheme under a shortened recovery plan.

This compliance and enforcement campaign is set to continue, starting with the rollout of a new series of compliance initiatives for employer pension plan provisions that TPR announced earlier this month. As part of this, employers who disregard their automatic enrollment pension duties are being targeted with short-notice inspections. The inspections have already started and will continue over the summer across the United Kingdom. Previous rounds of spotchecks targeted employers by region, from at-risk business sectors and from random test samples—as well as employers where there was evidence of non-compliance. But this new round of compliance inspections is data led—based on analysis of what the regulator calls “markers of non-compliance.” TPR will also be directly contacting other employers suspected of non-compliance by phone.

“We know the vast majority of employers are doing the right thing for their staff,” said Darren Ryder, TPR’s director of automatic enrollment. “However there are a small minority who persistently ignore their responsibilities. They can expect a knock at the door from us and enforcement action.”

TPR will use the newly available data to “pinpoint specific employers up and down the country who are suspected of breaking the law, including those who fail to put staff into a pension scheme or who make no, or incorrect, pension contributions,” according to the press release announcing the plans. It is mandatory for employers to take part in the inspections. Obstruction of TPR inspectors or not providing proper information when required are considered criminal offenses, and non-compliance could result in fines or court action.

Its Corporate Plan for 2019-2022, also issued earlier this month, outlines how TPR’s more targeted approach will contact hundreds more schemes in the next 12 months. The schemes expected to be contacted include defined benefit (DB) schemes, newly authorized master trusts, defined contribution (DC) schemes, and new employers with auto-enrollment responsibilities. More than a thousand schemes will also be contacted to check compliance with regulations on how savers are being treated in regard to dividend payments to shareholders, length of recovery plans, and efficient recordkeeping.

The corporate plan builds on last year’s joint strategy with the FCA that outlined how the agencies would tackle the key risks facing the pensions sector. The joint strategy was designed to address the “generally low levels of consumer understanding and engagement and the potential for poor advice and pension scams,” said the agency. This year, a new joint review of pension provision will be conducted by the two agencies.

In the plan, TPR outlined its priorities for compliance for the next three years. These include: extending its regulatory reach with a wider range of targeted regulatory interventions; enforcement of high standards of trusteeship, governance, and administration; interventions to ensure DB schemes are properly funded; ensuring compliance with automatic enrollment duties; and enabling pension plans to deliver benefits in response to Brexit.