Chris Edwards-Earl and Stephen Richards offer some tips for those finding themselves under TPR's microscope.
With the financial system in flux and pension schemes' funding under the spotlight, many trustees and businesses will find themselves engaging ever more with The Pensions Regulator (TPR).
TPR has increasingly turned to using its information gathering powers, issuing hundreds of section 72 notices, which require the recipient to handover documents or supply information. The notices are straightforward for TPR to issue, but not always to respond to. With the time and costs involved in preparing responses, and the threat of criminal sanctions, those receiving a section 72 notice may feel under pressure. If you receive a request:
- Check the deadline and scope of the request - The timeframes are usually short (sometimes just weeks) so if you need to request an extension be sure to do so as soon as possible. Make sure you are clear on exactly what TPR is asking for and what format or manner the information should be supplied in.
- Consider costs - Dealing with the request can be expensive and time-consuming. Check if your insurance policies cover the costs of responding.
- Is it a section 72 notice? - TPR has been known to email requests without issuing a formal notice. These will usually have a more relaxed timeframe and scope, however, note that information supplied under a section 72 notice (i.e. compelled by TPR) will be considered differently than information supplied under an informal request.
- Review the documents first - You should build in time to review the documents collected together before they are sent onto TPR to see if any should be withheld or redacted on privilege or data protection grounds.
- Challenge - It may be possible to challenge the reasonableness of the scope or timeframes, but legal advice should be obtained before doing so. There are criminal penalties for non-compliance without reasonable excuse, and unlimited fines.
TPR has increasingly called trustees and business executives in for 'informal' interviews about the steps being taken to adequately fund or protect the scheme. With the age of Covid-19 restrictions, such interviews will be switching to virtual calls. If called for an interview:
- Make a note - Make a record by taking an assistant who can write a note. You may want to refer to it in written correspondence with TPR later.
- Ask for an agenda - It will help you prepare, and is justified bearing in mind the time commitments for interviews.
- Advisers - It can, ironically, be better to avoid having advisors at the meeting. Taking them can be seen as taking an obstructive approach.
TPR case teams and approach
A pension scheme will usually have a regular TPR contact who monitors the scheme. Where TPR moves to an investigation phase, additional case managers will become involved who may be less acquainted with the pension scheme, at least at the outset. This 'two lane' approach can be frustrating - just stay focused on securing an appropriate deal with TPR. Remember, that will be its objective as well.
Be sure to engage constructively with the case managers, but remember it won't be easy to convince them that no regulatory action is appropriate. They will inevitably come to their own independent view. Fighting arguments out with TPR in correspondence can be costly. TPR has demonstrated its willingness to pursue cases to the highest levels (e.g. Box Clever). Instead try and engage with TPR on a without-prejudice basis at an early stage to try and clarify what outcome it is actually looking for.
With few published court decisions available to draw instruction from, and significant latitude given to TPR under the legislation, TPR issues reports of the cases where it has intervened, even if it did not exercise its powers (section 89 reports). These are intended to provide guidance to the market on how TPR will exercise its powers. Such reports are, however, highly fact-specific. TPR has indicated that it cannot be allowed to "fetter its discretion" by setting precedents and such reports are to be treated with caution. Advisers who are experienced in dealing with TPR can usually provide assistance.
Further tools at TPR's disposal
- Warning notice - This is the opening salvo to TPR's other moral hazard powers. Whilst reasonably detailed, TPR is not bound to its case as described in the warning notice and frequently moves on to more formal powers.
- Section 231 notice - TPR sets its own schedule of contributions in place of the existing one.
- Financial support direction/Contribution notice - Where statutory gateways are met, TPR can require that support be pledged, or contributions paid, to the pension scheme.
- Appointing an independent trustee - Typically used where TPR has concerns that the trustee board doesn't have sufficient knowledge and understanding, or that the trustees are at risk of breaching their duties.
- Future developments - The Pension Schemes Bill, once enacted, will change and enhance TPR's powers further, particularly with abilities to issue criminal sanctions in wider circumstances.
Chris Edwards-Earl is senior associate and Stephen Richards is partner at Stephenson Harwood
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