Pensions: what's new this week - 31 October 2022

• TPR enforcement strategy and policies
• CDC scheme reporting
• Rectification granted by High Court
• Court of Appeal: fraud victims can enforce rights against a pension scheme
• FCA measures to fight investment ‘greenwashing’
• Pensions Academy Online – 2 and 4 November

TPR enforcement strategy and policies

The Pensions Regulator (TPR) has published its consolidated scheme management enforcement policy and updated prosecution policy, alongside a response to its May 2022 consultation on those policies. It has also published a more general enforcement strategy.

Enforcement policy

The new enforcement policy sets out TPR’s approach to investigation and enforcement of compliance with scheme requirements. It replaces and consolidates three previous compliance and enforcement policies for DB, DC and public service schemes, and is also relevant to some aspects of master trust enforcement. It does not cover auto-enrolment, master trust authorisation and supervision, or collective money purchase (‘collective defined contribution’ or ‘CDC’) authorisation and supervision. The updated policy incorporates TPR’s new powers under the Pension Schemes Act 2021 (PSA21) and is also intended to increase transparency around TPR’s approach to using all of its enforcement powers.

Some of the key changes made following consultation include: clarifying that TPR would not expect to take action against trustees of transferring schemes in instances of pension scams in the absence of evidence of wrongdoing by them, and providing further information on the Determinations Panel and the Upper Tribunal and how TPR will work with other agencies. TPR has not acted on feedback that there should be more certainty on whether action will be taken and what that action may be, responding that it is important to retain flexibility, given the broad nature of some of its powers and the often complex and scheme-specific circumstances it encounters.

Prosecution policy

The prosecution policy explains how TPR will approach prosecuting criminal offences. Following consultation, the policy has been amended to give more detail on what is meant by ‘consideration of [TPR’s] available resources’ as a factor in deciding whether to open an investigation or pursue a prosecution. The consultation response notes that the policy is generally focused on deliberate acts, stating that ‘except for offences where legislation intends to target conduct as a strict liability matter (for example, employer-related investments), we are unlikely to consider genuine ‘unintentional breaches’ as justifying the use of our criminal powers’. The policy hasn’t been changed in response to calls to identify whether TPR is using criminal or regulatory powers at the start of an investigation, as TPR says it is not always possible to know at that stage; TPR will be ‘as transparent as possible’.

Enforcement strategy

The enforcement strategy sets out TPR’s approach to enforcement in all areas except auto-enrolment (which is covered by its own enforcement strategy). It highlights that TPR takes a risk-based approach, both in terms of allocation of resources and in considering which of its powers to exercise in a given situation (a theme that is reflected throughout the enforcement and prosecution policies). It also emphasises that TPR is proportionate and looks to improve saver outcomes without imposing unnecessary or unreasonable burdens.

Read the enforcement policy and prosecution policy.

Read the consultation response.

Read the enforcement strategy.

CDC scheme reporting

The DWP has updated its guidance on reporting costs, charges and other information, to take into account the introduction of CDC schemes. The updates add in the separate reporting requirements for CDC schemes and incorporate references to CDC schemes into the existing guidance where relevant. This version took effect from 21 October 2022.

Read the updated guidance.

Rectification granted by High Court

The High Court has approved an application for rectification where it was argued that underpins were added in to the scheme’s pension increase rules in error: Viavi Solutions UK Ltd v Viavi Solutions Pension Trustee UK Ltd.

The judge commented that the law concerning rectification as it relates to pension deeds is now in ‘an entirely settled form’. They noted in particular the principles that a claim for rectification must be established on the basis of ‘convincing proof'; that there will be cases in a pension context where the parties have not communicated with each other about the changes in question; and the court may have regard to events after the transaction as evidence of the parties' intention at the time of the transaction itself.

It was found that this case ‘amply reached the relevant evidential threshold’. The evidence taken into account included: (a) there was no record of an instruction to the lawyer updating the rules to increase the benefits to members under the Scheme; (b) there was no evidence that there was an intention to improve benefits to members by adding the underpins; (c) very shortly after the change was made, emails were sent identifying it as an error and a trustee meeting recorded that the drafting was incorrect; (d) efforts were made to correct the error, including an amending page purporting to correct the relevant rule being signed by the trustees and a deed of rectification – while these steps were deficient for various reasons, they provided ‘the best possible evidence of the intention of both the company and the trustees’; and (e) the scheme has been implemented on the basis that there were no underpins.

This case highlights the importance of acting quickly when errors are spotted, and carefully recording thinking both before changes are made and once mistakes have been identified. Actions taken after mistakes have been found can be just as important as contemporaneous events in proving rectification is appropriate.

Read the case.

Court of Appeal: fraud victims can enforce rights against a pension scheme

The Court of Appeal has upheld orders granted allowing victims to use the rights in a registered money purchase occupational pension scheme to satisfy a judgment against a defendant who had defrauded them: Bacci v Green. The order had required Mr Green to revoke his enhanced protection (which allows a higher amount of pension to be saved tax efficiently over a person’s lifetime) and delegate his rights to take a lump sum and pension, to allow his pension benefits to be accessed to pay the claimants. Mr Green appealed the decision on three grounds: (a) the power to revoke enhanced protection was not something that could be the subject of the relevant order; (b) the decision was contrary to public policy; and (c) the large tax liabilities that would be incurred as a result of the order made it inappropriate. All three grounds were rejected.

Read the case.

FCA measures to fight investment ‘greenwashing’

The Financial Conduct Authority (FCA) is consulting on a range of measures aimed at tackling ‘greenwashing’ (making exaggerated, misleading or unsubstantiated sustainability-related claims) of investment products. The proposals include labelling and disclosure requirements, some of which are aimed at consumers and some at institutional investors. One section of the consultation seeks views on how these measures could be expanded to FCA-regulated pension products. The consultation closes on 25 January 2023.

Read the consultation.

Pensions Academy Online – 2 and 4 November

This week we are holding our Pensions Academy Online (an update on issues for pension schemes and the people that run them). If you would like to attend, please sign up here. Remaining sessions will cover:

Pensions Dashboards – coming, ready or not – Wednesday 2 November, 9:30 – 10:30 a.m.

Get the inside track on dashboard developments from Chris Curry, Principal of the Pensions Dashboards Programme. We’ll update you on lessons learned in the testing phase and look at how trustees should be planning and preparing for implementation.

Legal update: remember, remember... – Friday 4 November, 9:30 – 10:30 a.m.

There’s been a stop/start feel to key pensions developments over the last couple of years, and it can be easy to lose track of where we’ve got to and what’s coming up. We’ll guide you through what’s happening now and what to expect next.