In This Edition:
- Spot checks to be targeted at suspect employers across the UK
- Five directors were fined and banned for causing losses to pension customers
- FCA publishes BSPS letter
- PPF writes to members to give an update on progress on uncapping compensation payments
- Triple Lock to return next year?
- TPR CEO to step down in 2023
- TPR guide to report pension scams
- Stronger Nudge comes into force
- FOS confirms over half of DB transfer complaints are upheld
- TPR updates DC scheme return guidance
- PDP connects first commercial pensions dashboard
- TPR publishes guidance on pensions dashboards
- TPR lays CDC code
- Pensions consumer journey feedback statement
Spot checks to be targeted at suspect employers across the UK
TPR confirmed in May that spot-checks are to be carried out on Employers suspected of not carrying out their workplace pension duties.
The compliance drive marks a return by TPR to larger-scale in-person inspections targeting different areas across the UK, following the lifting of COVID restrictions earlier this year.
While TPR has continued with urgent ad-hoc inspections on employers suspected of serious breaches, its routine compliance drives had been paused in response to COVID-19 social distancing restrictions.
TPR’s Head of Compliance and Enforcement, Joe Turner, said: “Despite the challenges of the past two years, the majority of employers have continued to meet their responsibilities, including paying contributions in full on time and recognising that automatic enrolment is business as usual.”
“But where we are aware that an employer is failing to do the right thing, we will take action to protect savers, including on-site inspections. This means we could be knocking on an employer’s door in any part of the UK.”
“Where an employer fails to meet their automatic enrolment duties, our priority is to make sure they become compliant. We use our wide-ranging powers to do so, including issuing financial penalties where appropriate.”
As well as detecting and confirming non-compliance, the inspections also allow TPR to gather valuable insight into employer behaviour, including identifying common errors. These include administrative errors in respect of ongoing duties. In most cases, TPR inspectors work on-site with employers found to be non-compliant to help get them back on track.
On-site inspections will be carried out across a number of regions and cities throughout the UK in the coming months, including Greater Manchester, Nottingham, Greater London and Belfast. TPR has previously visited employers in all parts of the UK.
As well as carrying out spot check inspections, TPR also detects non-compliance using RTI data shared by HMRC, alerts from pension schemes, whistleblowing reports from individuals, and other information and intelligence.
Five directors were fined and banned for causing losses to pension customers
The FCA has prohibited five directors of financial advice firms from working in financial services and fined them over £1 million after they caused significant losses to pension customers.
The decisions follow an extensive 300-page judgement issued by the Upper Tribunal in which the five directors unsuccessfully challenged the FCA’s decisions.
The Tribunal found Andrew Page, Thomas Ward, Aiden Henderson, Robert Ward, and Tristan Freer had failed to act with integrity, having either acted dishonestly or recklessly. Each had been directors at failed financial advice firms (Financial Page Ltd, Henderson Carter Associates Limited, and Bank House Investment Management Limited) who provided unsuitable advice to over 2,000 customers causing them to place their pensions in high-risk financial products in self-invested personal pensions in which Hennessy Jones, an unauthorised firm, had a significant financial interest. These customers had been referred to them by Hennessy Jones, which was also involved in designing the pension advice process used by these firms.
This scheme caused significant losses of over £50 million to over 2,000 consumers who have been compensated now by the Financial Services Compensation Scheme. As well as the negative impact on consumers, this also affected other financial services firms, which have to contribute to the costs of the FSCS.
The Tribunal found that all five individuals allowed their 'instincts and values to be overridden' and their judgement to be compromised for personal financial gain. They failed to scrutinise where their customers’ pension funds were being invested. The scale of these shortcomings has led to very large penalties being imposed on directors of small IFA firms.
FCA publishes BSPS letter
The FCA has written to members of the British Steel Pension Scheme (BSPS) who transferred out in 2016, outlining steps they need to take if they are worried about the advice they received.
The letter states: “Generally, there is a six-year time limit to complain about the advice you have received. This time limit may be about to expire. Therefore, you need to act quickly. You should consider whether your advice was suitable or not based on your needs... If you feel you have received unsuitable advice, then you should consider complaining as soon as possible and request any compensation you may be potentially due.”
In some other BSPS news, the House of Commons Library had updated briefing paper CBP-8288, which looks at the “time to choose” exercise carried out when the British Steel Pension Scheme was restructured in 2017/18, and the following reviews and redress scheme.
PPF writes to members to give an update on progress on uncapping compensation payments
The PPF has written a letter to its members, updating them on the work being done to uncap compensation payments and calculate and pay the arrears plus interest that the PPF owes. In the letter, the PPF acknowledged that progress on this issue has been slower than expected and explained the reasons for the delay.
TPR CEO to step down in 2023
Charles Counsell has announced he will not seek a second term as Chief Executive of The Pensions Regulator (TPR) following a successful tenure in which the needs of the saver have been placed at the heart of TPR’s work.
Mr Counsell took up the post of CEO in April 2019 and will step down at the end of March 2023.
During his time as CEO, Mr Counsell has successfully led a fundamental reorientation of TPR by delivering TPR’s new 15-year strategy to put savers at the heart of all it does and embracing the shift from defined benefit to defined contribution saving.
The TPR’s Chair, Sarah Smart, will lead the search for a successor. The appointment will be subject to the approval of the Secretary of State for Work and Pensions.
TPR guide to report pension scams
TPR, the FCA and Action Fraud have produced a guide to aid in reporting suspected and actual pension scams. The guide confirms what you should report, when you should report, who you should report to and what happens when you submit a report.
Stronger Nudge comes into force
From 1 June 2022, the “stronger nudge” comes into effect. New regulations require trustees/scheme managers to “nudge” individuals to Pension Wise guidance or receive confirmation they wish to opt-out (from the guidance) before they access (take) or transfer their flexible benefits (DC benefits including AVCs and cash balance). These rules also apply to beneficiaries of the member-for-death benefits.
When a member/beneficiary makes an application to the trustees/scheme managers about transferring or accessing flexible benefits, trustees/scheme managers must:
- Refer the member/beneficiary to Pension Wise guidance and explain the nature and purpose of the guidance (including that it is free);
- Offer to book a Pensions Wise appointment for the member/beneficiary. If the offer is accepted, the trustees must book the appointment. If the offer is not accepted, or where the trustees are unable to book an appointment despite having made reasonable efforts to do so, the trustees may provide details of how the beneficiary can book a Pension Wise appointment; and
- Explain to the member/beneficiary that they cannot proceed with the application unless the member/beneficiary has received the appropriate Pensions Wise guidance or has otherwise opted out of receiving the guidance. If the member/beneficiary decides to opt-out, they will need to supply the trustees with an opt-out notification.
If the member/beneficiary does not confirm that they have received the guidance or fails to correctly opt-out, the trustees/scheme managers will need to repeat certain aspects of the “stronger nudge” in subsequent communications with the beneficiary in respect of the same application.
The obligation to deliver the “stronger nudge” arises early in the process when a member/beneficiary contacts the scheme to discuss their options, rather than just when an application to transfer out is received, which is likely to be later. Trustees/scheme managers are, however, able to provide quotes or other information to member/beneficiary before delivering the “stronger nudge.”
There are some exemptions for transfers. The “stronger nudge” requirements do not apply in the following circumstances:
- Where the member/beneficiary is under the age of 50.
- When the purpose (or one of the purposes) of the member’s/beneficiary’s application is not to receive the flexible benefits, e.g. the application is intended to consolidate pension benefits.
- When the trustees/scheme managers receive from the member/beneficiary (or a person authorised to act on their behalf) verbal or written confirmation that the member/beneficiary has opted out of, or has received, Pensions Wise guidance.
- When the member/beneficiary is transferring into a pension scheme which, broadly speaking, is regulated by the FCA.
The regulations state that, except in the circumstances outlined below, an opt-out notification must be given “in a communication made solely for the purpose of opting-out” of the guidance. An opt-out notification must therefore be contained in a separate communication (either written or verbal) unless the member/beneficiary (or someone authorised to act on their behalf) confirms that:
- The member’s/beneficiary’s application is solely to transfer their flexible benefits;
- In the 12 months preceding the application, the member/beneficiary has received either (i) regulated financial advice in connection with the application or (ii) appropriate pensions guidance in connection with the application; or
- The member/beneficiary qualifies for a serious ill-health lump sum.
Trustees/scheme managers need to keep records of interactions with member/beneficiary, including the receipt of appropriate pensions guidance following a nudge and any opt-out notifications.
TPR has updated its website with information on the stronger nudge.
There are corresponding FCA requirements for contract-based (personal pensions etc.) schemes which “broadly” mirror the DWP requirements above for occupational schemes.
FOS confirms over half of DB transfer complaints are upheld
The Financial Ombudsman Service (FOS) published its annual complaints data for the 2021/22 financial year. The data confirms, 52% of complaints about DB transfers were upheld between April 2021 and March 2022. FOS also said that during this time period, over 550 complaints were received about the British Steel Pension Scheme and of the cases resolved 90% were upheld.
TPR updates DC scheme return guidance
TPR has updated its DC scheme return guidance. If your scheme needs to complete a scheme return this year, TPR will send your scheme return notice between July and December 2022.
Trustees/Managers must complete the scheme return by the due date in the scheme return notice.
Trustees/Managers must submit a scheme return for all the DC schemes they are responsible for. A DC scheme with between two and 11 members is requested to complete a scheme return every three years. A DC scheme with 12 or more members is requested to complete a scheme return every year.
PDP connects first commercial pensions dashboard
In December 2021, the Pensions Dashboard Programme (PDP) selected Moneyhub, the data, intelligence and payments company, and two other potential commercial dashboard providers to work with the programme in an initial (alpha) six-month phase. Now, Moneyhub’s dashboard is the first commercial dashboard to be successfully connected to the central architecture, in addition to the MoneyHelper non-commercial dashboard from the Money and Pensions Service.
The connection means that the next phase of detailed beta testing, working with real pensions data, will proceed throughout the second half of this year and beyond.
TPR publishes guidance on pensions dashboards
The Pensions Regulator (TPR) has launched its new “Deadline” campaign urging trustees and scheme managers to start preparing for pensions dashboards.
It is expected that occupational pension schemes with 100 or more relevant members will connect to pensions dashboards through a phased approach according to the size and type of pension scheme. The largest schemes will connect from June next year, and TPR will begin writing to them 12 months ahead of their connection deadline to alert them to what they need to do.
To help trustees and scheme managers get ready, TPR has published ‘Pensions dashboards: initial guidance’, which outlines their legal duties, including a timeline section setting out what they must do and by when.
TPR’s campaign urges trustees and scheme managers to check their connection deadline and download a checklist.
You can read the full press notice on TPR’s website.
TPR lays CDC code
TPR has laid its new code of practice for the authorisation and supervision of collective defined contribution (CDC) pension schemes before Parliament, allowing the code to complete its legislative passage in time (40 days) for trustees to apply from 1 August for authorisation to operate a CDC scheme. The code sets out how trustees can apply for authorisation and how TPR will assess schemes against the statutory authorisation criteria at the initial application stage and throughout ongoing supervision. TPR has also published its response to the consultation on the draft CDC Code of Practice.
Pensions consumer journey feedback statement
TPR and FCA made feedback statements for the joint Call for Input on the pensions consumer journey.
In the Call for Input, they invited views on how best to engage consumers so they can make informed decisions that lead to better pension saving outcomes. This response details the feedback received and their next steps.
This Pensions Spotlight does not constitute advice, nor should it be taken as an authoritative statement of the law.