Pensions; TPR Consultation, HMRC publishes Countdown Bulletin No 54 and more

• TPR consultation: Our approach to the investigation and prosecution of the new criminal offences
• The Small Pension Pots Working Group holds its first meeting
• PPF releases updated compensation cap factors
• MAPS reveals plans for a single consumer destination driving financial wellbeing
• HMRC publishes Countdown Bulletin No 54
• Minister calls for schemes scam support

 

TPR consultation: Our approach to the investigation and prosecution of the new criminal offences

(AF3, FA2, JO5, RO4, RO8)

The Pension Schemes Act 2021 created two new criminal offences relating to DB schemes:

• avoidance of employer debt, and
• conduct risking accrued scheme benefits.

These are serious offences with punishments of up to seven years in prison upon conviction.

The Pensions Regulator (TPR), the prosecuting authority in England and Wales, has now launched a consultation on its draft policy which sets out its approach to the investigation and prosecution of the new offences. Importantly, TPR states that its understanding of the policy intention behind these new offences is that they are not intended to achieve a fundamental change in commercial norms or accepted standards of corporate behaviour in the UK. Despite the potential otherwise, they are intended to enable TPR to address the more serious intentional or reckless conduct already within the scope of its contribution notice powers, or that would be in scope if the person was connected with the scheme employer.

It is expected that the relevant sections of the Act to be commenced from 1 October 2021. While it is extremely unlikely that the new offences will apply retrospectively, the draft policy does state that evidence pre-dating 1 October may be relevant to investigations and prosecutions of actions after this date, if, for example, it indicates someone’s intention.

Which cases may be prosecuted?

The draft policy sets out some example criteria that warrant investigation and prosecution as follows:

• The primary purpose of the suspect’s conduct is the abandonment of the scheme without provision of appropriate mitigation,
• Significant financial gains have been unreasonably made to the detriment of the scheme,
• There has been some other unfairness in the treatment of the scheme; and/or
• The trustees, TPR and/or the Pension Protection Fund have been misled or not appropriately informed.

Examples of the sort of thing that TPR has previously encountered that might be appropriate for prosecution are:

• The sale of an employer without replacing an existing parental guarantee over the employer's section 75 debt, resulting in the loss of the guarantee (in circumstances where the trustees were not told about the sale in advance),
• The purchase of an employer with no further investment into its business, subsequent mismanagement of the company, and extraction of value before the company went into administration,
• The stripping of assets from an employer, which resulted in substantial weakening of the support for the scheme,
• Taking steps to bring about the unnecessary insolvency of the scheme employer with the intention of buying the employer’s business without the scheme.

Who may be prosecuted?

The offences are drawn widely in the legislation so that “any person” may be liable to be tried and punished, including someone who helps or encourages someone else to commit either of the new offences. The draft policy sets out some examples of where advisers could be prosecuted, but they are extreme in nature.

Reasonable excuse

The Act provides that a person does not commit an offence if the suspicious act, omission or course of conduct has a “reasonable excuse”, and in bringing a prosecution it is for TPR to demonstrate that the defendant does not have one.

However, there is a lot of doubt about what a reasonable excuse means in a pensions context. The draft policy states that there will be three factors which will be significant for TPR in determining whether or not there is a reasonable excuse:

• Whether the detrimental impact on the scheme / likelihood of full scheme benefits being received was an incidental consequence of the act or omission, as opposed to a fundamentally necessary step to achieve the person’s purpose,
• The adequacy of any mitigation provided to offset the detrimental impact,
• Where no, or inadequate, mitigation was provided, whether there was a viable alternative which would have avoided or reduced the detrimental impact.

For each factor example scenarios are given, but many are relatively straightforward, leaving open the question of what other scenarios would not be regarded as containing a “reasonable excuse”.

The consultation closes on 22 April.

In a Press Release, Joe Dabrowski, Deputy Director, Policy at the Pensions and Lifetime Savings Association, welcomed that the consultation outlines how the Regulator intends to interpret the law and that it is seeking views from the industry on how to provide greater certainty. Commenting on the draft policy, he said: “What the draft policy does not, and cannot, address is the key issue of the 'unknown unknowns' — the potential for unintended consequences, and any future interpretations of the legislation by the Courts. Even in the best case scenario this will generate substantial extra, and probably unnecessary, compliance overheads.”

Sackers Partner Peter Murphy said in their Press Release that he is reassured that TPR “intends its approach to be guided by statements already made in Parliament, that the new offences are not intended to give rise to a fundamental change in normal commercial practice or accepted standards of corporate behaviour in the UK”. However, Mr Murphy said that whilst the examples of behaviour outlined in the draft policy help to support this intended approach, they “provide little detail, and judicial consideration of the existing anti-avoidance powers is limited”. He added: “So while it might allay fears around the more incidental consequences on affected pension schemes, there will still be a lot of shades of grey and I expect the new criminal offences will result in more cautious corporate behaviour where the legal position is not so clear.”

 

 

The Small Pension Pots Working Group holds its first meeting

(AF3, FA2, JO5, RO4, RO8)

The Pensions and Lifetime Savings Association has confirmed in a Press Release, details of the first session of the Small Pension Pots Working Group held on 24 March 2021. The Minister for Pensions and Financial Inclusion, Guy Opperman, attended the meeting.

The group was formed to address the issue of the ever-increasing number of small, deferred pots in the pension system, prompted by the introduction of Automatic Enrolment (AE) back in 2012. The problem seems to arise where those saving towards their retirement move jobs and lose track of their existing savings.

Small pension pots present challenges for both savers and for schemes. The small balances of these inactive pension pots often get completely swallowed by costs and charges, and where individuals have multiple pension pots, it makes it harder for them to keep track of their savings. It is also more burdensome for pension schemes to administer small pension pots, as opposed to administering larger pension pots.

Research highlights the fact that, at present, there are more than eight million deferred pension pots, and eight million active pots in master trust schemes. There are many more in other Defined Contribution (DC) schemes. It is perceived that, in master trusts alone, by 2035, there could be approximately 27 million deferred pension pots and nine million active pots if no action is taken, hence why the group was formed to tackle the problem.

The aims of the Small Pots Co-ordination Group are to explore current data-matching requirements, data standards and to look at the requirements for a low-cost transfer process for mass consolidation. The Group will also direct work across the industry, “focusing on the administration processes that will underpin a future long-term consolidation model in the interests of savers.”

Guy Opperman is quoted as saying: “Given the risks that the growth of deferred small pots presents to savers and their ability to plan for retirement, it is imperative that we find a solution. I'm very pleased that representatives from across the industry are now convening to consider ways to combat this, and their progress reports will provide valuable insight for tackling this issue together.”

 

 

PPF releases updated compensation cap factors

(AF3, FA2, JO5, RO4, RO8)

The Pension protection Fund (PPF) has released updated compensation cap factors used to determine the level of compensation payable by the PPF to certain individuals from 1 April 2021. The compensation cap remains unchanged for all age groups for 2021/22. For those at age 65, the cap will remain at the current level of £41,461.07 per annum. This has been confirmed by the DWP and is in response to the UK annual average wage inflation having decreased over the year.

 

 

MAPS reveals plans for a single consumer destination driving financial wellbeing

(AF3, FA2, JO5, RO4, RO8)

The Money and Pensions Service is, according to a Press Release, to launch “MoneyHelper” this summer; a single destination providing money and pensions guidance over the phone, online and face to face. It will replace MaPs’ three legacy brands:

• The Money Advice Service,
• The Pensions Advisory Service, and
• Pension Wise.

However, Pension Wise, which provides guidance for people aged 50 and over about their DC pension options, will continue as a named service under the MoneyHelper umbrella.

A toolkit and guide will be produced to assist stakeholders manage their part of the changeover to MoneyHelper, scheduled to start from early June 2021, and from this point consumers will be automatically redirected from the legacy brands’ websites to MoneyHelper.

 

 

HMRC publishes Countdown Bulletin No 54

(AF3, FA2, JO5, RO4, RO8)

The 54th Countdown bulletin reminds schemes that HMRC can only issue Final Data cuts where they have the correct information about the scheme.

HMRC says “In Countdown Bulletin 53 we said that HMRC planned to complete the issue of the final data cuts by the end of July 2020. There were no significant delays to the proposed timeline. We issued all output received from the final data cut scans to the pension scheme administrator registered on our systems.

We were unable to issue data cuts to those schemes with nil output or where we have been unable to trace the scheme administrator.

If your scheme has not received its final data cut and you were appointed administrator of a scheme before 31 July 2020, contact the Customer Relationship Team by email to CRM.schemereconciliationservice@hmrc.gov.uk.

The deadline for requesting the final data cut for your scheme is 31 July 2021. 

HMRC will only publish final data cuts for:

• schemes that engaged with the Scheme Reconciliation Service
• ceased schemes with an ongoing file in the Scheme Cessation area in April 2018”

 

 

Minister calls for schemes scam support

(AF3, FA2, JO5, RO4, RO8)

Pensions Minister, Guy Opperman, has called on pension schemes to do their bit in attempting to stop the scammers who are intent on stealing the savings that people have put away for retirement.

In a Press Release, published by the Department for Work and Pensions (DWP) confirmed that Mr. Opperman has contacted approximately 90 different schemes, by letter, to inform them that they must begin sharing scam data with the Pension Scams Industry Group (PSIG) so that there is a more accurate representation of the scale of the issue.

Currently, not all pension schemes share data with the PSIG, however, information that is collected is used by Project Bloom, which focuses on preventing pension scams and fraud.

It is hoped that greater data sharing, along with enhanced pension transfer rules included within the Pension Schemes Act, will mean that those who are saving for their retirement are further protected from scams.

Guy Opperman said: “Today I am calling on all pension scheme trustees to support us in the fight against the callous criminals stealing savers’ pension pots. While the measures contained in the Pension Schemes Act are a significant step forward, we need government, the individual and industry to tackle this together. Pension schemes have a professional, ethical and moral duty to try and prevent their members being ripped off, and better data-sharing is a vital first step.”