TPR approach to Enforcement Powers: ‘Consolidation, Clarification and Simplification’

The Pensions Regulator (TPR) is consulting on a simpler draft enforcement policy and a draft updated prosecution policy[1]. The enforcement policy consolidates previous policies for defined benefit, defined contribution, hybrid and public sector pension schemes. Both the enforcement and prosecution policies have been updated to include the new powers granted to TPR in the Pension Schemes Act 2021 (see the Appendix for an overview of these powers).

The guidance is intended to help those facing enforcement action understand TPR’s processes. According to David Fairs, TPR’s Executive Director of Regulatory Policy, “We want to be clear with the pensions industry about our approach to enforcement and prosecution. With our new powers to help us ensure savers’ money is secure, we felt it was timely to review our existing policies and consolidate them where possible, so they are easier to navigate… We’ve simplified, consolidated and clarified the way in which our regulated community accesses important information about enforcement.”

TPR has also published two new ‘high fines’ policies for its avoidance powers and information requirements powers, alongside a response to last year’s consultation on new policies regarding overlapping powers, monetary penalty powers and information gathering.

Last year’s consultation addressed TPR’s approach to using both criminal and regulatory powers simultaneously, to impose high fines for information gathering and avoidance related scenarios and the use of section 72 notices, interviews and inspections in enforcement cases. In its response to the consultation, TPR states that the key issues raised by the responders were:

• when the financial penalty powers should be used, as opposed to the criminal powers
• the scenarios in which both criminal and regulatory powers may be used and what the information gathering powers would be in such a scenario
• the processes that concerned parties would expect TPR to follow when investigatory powers are used
• the rationale behind the banding used in the different levels for fines
• a lack of examples of when the new powers should be used
• a need for a clearer set of policies on the new powers and how they can be utilised alongside existing powers
• the need for better formatting by way of headings and links in the existing draft policy.

NB The compliance and enforcement policy for Master Trusts, as well as that concerning automatic enrolment, remain separate.

Enforcement and Prosecution Policies

The enforcement policy now incorporates TPR’s use of its ‘overlapping powers’ (i.e. imposition of high financial penalties and / or criminal sanctions in relation to the same act) and its approach to ‘information-gathering’. The draft follows the modular approach adopted for the prospective TPR Single Code of Practice. It contains 12 separate chapters[2]. 

1. Assessment of risk and harm
2. Investigations
3. Using our enforcement powers
4. Enforcement outcomes
5. Enforcement options (including anti-avoidance and scheme-funding powers)
6. Overlapping powers (including case examples)
7. Enforcement procedures scheme management
8. Challenging enforcement action
9. Debt recovery
10. Measuring impact
11. Publishing information about cases
12. Draft prosecution policy

The draft prosecution policy includes TPR’s general approach to prosecuting criminal offences, who it can prosecute and how it will select cases for investigation and prosecution. It also outlines what actions it may take, including the issuing of cautions and preventing offenders from benefitting financially from their criminal activity. Appendix I in the draft prosecution helpfully includes a list of all the criminal offences under workplace pensions legislation.

New high fines policies for its avoidance-type powers and information requirements powers

TPR has already separately published the policy on its approach to the investigation and prosecution of the new criminal offences in sections 58A and 58B of the Pensions Act 2004 and, along with the draft enforcement policy, is publishing final version of the:

• High fines policy – approach to avoidance, dealing with avoidance-type penalties and failure to pay a contribution notice issued under section 38 of the Pensions Act 2004.
• High fines policy – approach to information requirements, dealing with penalties for breaches of the notifiable events regime and penalties for providing TPR, or a trustee, with false and misleading information.

Comment

Those in scope of the enforcement powers should familiarise themselves with the guidance, noting that some of the policies are for consultation and some are final.

Appendix – TPR Powers and PSA 2021

The Pension Schemes Act 2021 has introduced a number of new powers:

1. New criminal offences:
   1. avoidance of employer debt
   2. conduct risking accrued scheme benefits
   3. failure to pay a Contribution Notice (CN) issued under section 38 of the Pensions Act 2004
2. New penalty powers to impose high fines of up to £1m for:
   1. failure to comply with the new notifiable events requirements
   2. failure to comply with the accompanying statements in relation to some notifiable events
   3. providing false/misleading information to The Pensions Regulator
   4. providing false/misleading information to trustees
   5. avoidance of employer debt
   6. conduct risking accrued scheme benefits
   7. failure to pay a CN issued under section 38 of the Pensions Act 2004
3. New information gathering powers to conduct interviews and inspections.
4. New fixed and escalating penalty powers to impose fines for failure to comply with TPR information gathering powers.

[1] New, consolidated and simplified enforcement policy and updated prosecution policy published by TPR | The Pensions Regulator

[2] Those headed “Investigations” and “Overlapping powers” contain TPR’s finalised policies from last year’s consultation, including updated examples of how it expects to exercise its overlapping powers, and these pages are marked to say that the chapters are not open to consultation.