Regulator clarifies pension trustee penalty rules

Regulator clarifies pension trustee penalty rules

The Pensions Regulator has published a paper clarifying its rules for imposing penalties on pension trustees.

The paper, still in the draft phase, covers mandatory and discretionary penalties and further enforcement actions. 

It was launched today (23 March) after trustees requested more transparency on how the regulator reached the decision to impose fines.

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The paper focuses particular attention on two types of breaches: chair’s statement breaches and scheme return breaches.

It includes a lengthy explanation of how the regulator assesses the severity of a breach, dividing them into three bands levels. 

It also sets out the minimum and maximum penalties for breaches.

Band level one breaches include failing to submit the scheme return on or before the return date, and failing to inform the regulator that a registrable scheme has been set up.

Such breaches incur penalties of up to £1,000 for individuals, and up to £10,000 for collective trustees.

Band level two breaches involve "failing to provide members with a statutory money purchase illustration within the required timeframe", and bring penalties of up to £2,500 for individuals, and £25,000 for collective trustees.

Band level three penalties include "reimbursing a trustee out of the assets of a scheme in breach of legislative restrictions, or trustees of a ‘relevant scheme’ failing to process core financial transactions promptly and accurately".

These activities bring penalties of up to £5,000 for individuals or £50,000 for collective trustees.

The paper goes on to give an exhaustive explanation of how it calculates penalty amounts.

Andrew Warwick-Thompson, executive director for regulatory policy at The Pensions Regulator, said: "By consulting on our monetary penalties policy we are inviting views on our approach to applying fines on trustees and other scheme managers, but we are also sending a clear message that we are getting tougher on poor governance.

"We want trustees to understand that action may be taken where they fall short of expectations. We have shown that we will act where trustees are not complying even with their basic duties."

The paper was released today (23 March) and will be open for submissions until 9 May.