How the Pension Schemes Act will affect your clients

  • Describe the impact of the new Pension Scheme Act
  • Explain the criminal aspect of it
  • Identify ways of handling the TPR with its new powers

Extra teeth for TPR investigations and data gathering

Some companies and individuals may already have experienced TPR investigations, with their power to demand information relating to a pension scheme. TPR’s right of investigation is strengthened by a new interview power - as well as additional situations when it may conduct dawn raids without a warrant. Dealmakers and lenders should be aware that they may now fall within TPR’s net.

Alongside these new powers and new duties, TPR will be backed up by a criminal offence of providing “false or misleading information”. 

At the same time, TPR will be able to issue civil penalties in situations where it has been provided with false or misleading information. In these cases a lower burden of proof applies and there are potential penalties of up to £1m.

Preparing your business for the new regulatory approach

This is one of the most significant changes to the way defined benefit pensions work in the last twenty years. TPR’s powers have been updated with a fresh view of its role in how businesses and owners deal with their pension schemes.

With the new criminal offences and the new TPR powers in prospect, proper management of defined benefit pensions should be moved up the corporate agenda and acknowledged as a risk item. 

Boards and general counsel will want to consider whether even internal corporate actions have relevance for the pension scheme.

Proceeding safely is not impossible though, but pensions should not be left as an afterthought in a transaction. Corporates should already be planning how they can avoid damage to the pension scheme. A key, but often overlooked aspect, is to keep and maintain an audit trail. 

It can be helpful where evidence is required to show when and how there has been thought given to a pension scheme. This can be invaluable when companies need to show that there was a “reasonable excuse” and that this was considered in advance of key decisions.

For some of TPR’s civil powers, certain defences are only available if it can be shown that pensions were reviewed before proceeding.

The reviewing process can also be helpful in heading off investigations by TPR at the start. TPR’s extensive investigation powers and broad control of the timeline, mean that costs and management time involved in responding to TPR can mount significantly.

Being prepared to justify actions in advance can establish a narrative with the TPR, showing responsible behaviour and will save having to reconstruct decision processes.

In any case, a cursory glance at pensions will not be sufficient. Management will want to show that proper thought has been given to concerns and that advice has been considered and accepted where appropriate. All of this process should be logged.