The Pensions Regulator’s new
So, the much discussed Pension Schemes Bill has finally received Royal Assent and we will now start to see the Pensions Regulator’s (TPR) new powers in practice. Or will we?
In the past, TPR has been criticised for using its powers rather sparingly. But the initial lack of use of these new powers will have nothing to do with TPR, and all to do with the Secretary of State who must first make implementing regulations before TPR actually gets to deploy its shiny, new powers.
Why the wait, and how long will it be? We don’t know exactly how long, but the Pensions Minister (Guy Opperman) has said that the aim is for them to be available by the autumn this year. In the meantime, TPR will be consulting on the highly anticipated guidance for the new criminal sanctions. The guidance will be of crucial importance because the legislation itself is, as has been much publicised, very broad and could in theory capture a vast array of corporate activity. A prosecution will more likely be instigated, and be successful, if the “act or failure” falls within the scope of offending activity described by the guidance.
TPR is also expected to be busy consulting on and issuing a Code of Practice in relation to the two new tests for issuing a contribution notice. And specifics for the new notifiable events regime will also need to be brought into play.
Does this mean it will be business as usual until the autumn? Well, Guy Opperman has confirmed that none of TPR’s new powers will be retrospective but it is possible that, for example, TPR’s new interview and inspection powers may have effect sooner. There may be other powers too that wouldn’t need to wait. But in any event, this is not a time to ignore what is about to happen – it is a time to prepare.
We now know exactly what TPR’s new statutory powers will be, and they undoubtedly represent a very significant shift in the DB pensions landscape.
Contribution notices were once thought to be a unique and extreme power, but their ‘fear factor’ has diminished over time because they have been only very rarely used. Not only will the new tests for contribution notices be broader and likely to be clearer in their application (and, hence, used more frequently), they will also be just one of a number of powers TPR will be able to unleash in the context of corporate restructurings and other activity. In addition to that compensatory power, TPR will be able to punish through civil penalties and criminal sanctions.
The scope of these punitive powers is yet to be seen. But we know they are not limited just to circumstances of fraud or similar and, while resorting to criminal prosecution is likely to be rare, the same cannot be said of the civil penalties of up to £1 million. They can be imposed for avoiding an employer debt, conduct that ‘risks accrued scheme benefits’, and for providing false or misleading information to TPR and, in certain circumstances, trustees. The process for imposing these penalties will be comparatively straightforward, and TPR will want to show that it is not afraid to punish (in the right circumstances).
Regardless of when exactly TPR’s new powers will take effect, now is the time to recognise what they are seeking to achieve and act accordingly. Where there is a relevant DB pension scheme, virtually every significant corporate decision will need to be carefully considered in the context of TPR’s new powers. Trustees will genuinely have a seat at the corporate stakeholder table, and they will need to engage responsibly. There might not be a flood of new inmates at HM Prison Wormwood Scrubs, but we should expect it to be a very different and, at times, uncomfortable new DB pensions landscape.