Pensions Regulator  

TPR aims for transparency in consolidated enforcement powers

The policy also covers the regulator’s approach to its information-gathering powers and the penalties for non-compliance, and explains that its approach to enforcement powers generally must be proportionate, accountable, consistent, transparent and targeted.

TPR’s priority for engagement is determined in large part by an assessment of risks and harm, and the document lays out the factors considered when deciding on the level of engagement or enforcement action.

These factors include the level of harm or risk of future harm, the size of the scheme’s liabilities, the number of members affected, the type of breach, compliance history and previous interactions with TPR or other regulatory agencies.

High fines policy

The draft policy sets out the conditions under which an act (or a failure to act) demands that a fine be issued. The fines can rise to as much as £1mn, but there are a number of bands beneath that amount to account for the varying severity of any wrongdoing.

Fines can be issued for non-payment of a contribution notice, and also for the offences of avoidance of employer debt and conduct risking accrued scheme benefits, both of which were introduced as part of the Pension Schemes Act 2021 to some controversy given the potential extent of the powers and the lack of useful examples highlighting when and how they would be used.

The three bands stretch from “lower culpability/lower harm”, which carries a penalty of between £100,000 and £400,000; through “higher culpability/lower harm or lower culpability/higher harm”, which carries a penalty of between £250,000 and £650,000; to “higher culpability/higher harm”, carrying a penalty of between £400,000 and £1mn.

The draft policy sets out examples “of features of culpability”, which include “deliberate act or failure and/or causing or encouraging another person to act or fail to act”, as well as “recklessness or negligence, including disregard of risks or lack of care, whether based on actual foresight or what could reasonably be expected to have been known”.

They also include “significant decision-making powers, responsibilities, influence and/or proximity to the decision-making”, and “holding a position of trust or being subject to professional duties”.

TPR’s assessment of harm takes into account “any negative impact on the scheme as a whole or any of its members”, whether the impact of an act is irreversible, whether it has resulted in increased reliance on employer covenant, whether it has increased the likelihood of compensation payable by the Pension Protection Fund, and whether it may undermine public confidence in pensions.

A separate document was published dealing with the regulator’s information requirements, featuring a similar banding system for fines and setting out what constitutes a breach of the notifiable events regime.