Chris Edwards-Earl says TPR uses RIRs to educate the industry on how it operates and what it expects from others
Disputes lawyers often work on cases that will never be talked about outside a small circle of those involved.
Take funding disputes, for example, where parties aim for a settlement which balances the sponsor's finances with the funding objectives of the scheme, hopefully without the case compelling The Pensions Regulator (TPR) to step in formally.
That intervention may then end up with contribution notices being issued, or exercises of Section 231, and even hearings with a public judgment. Once in a while though, TPR will decide to shine a spotlight on a dispute, even where formal regulatory action didn't take place.
Regulatory intervention reports, or Section 89 reports (RIRs), are not like judgments handed down by judges in court. TPR does not set out what arguments were used by the parties, like a judge would. Instead, TPR is trying to educate the industry on how it operates and what it expects from others.
This means that the market has real examples to work with rather than guidance alone. That said, it is perhaps worth noting that TPR does not actually allow itself to be fettered for future cases through what it says in these reports.
A recent example was the RIR published for the MGN Pension Scheme. TPR recounted how its involvement in the dispute secured an extra £5.1m a year for the scheme, beyond the amounts already committed by the sponsor.
This followed the trustees notifying TPR of a failure to meet the deadline for filing the 2019 (and then 2022) triennial actuarial valuations, indicating it could not reach agreement with the sponsor.
The trustees calling in the proverbial big guns of TPR, first through its supervision team, and then, as the temperature increased, through the enforcement team, applied considerable pressure on the sponsor. The sponsor increased the level of contributions on the table and, in addition, enhanced an existing dividend sharing agreement (whereby dividends paid above a certain percentage would lead to a commensurate payment to the scheme).
RIRs can be helpful, not just as a cautionary tale, but because of what TPR chooses to highlight. In the MGN case, TPR wanted to emphasise two things that it regarded as essential to its decision not to take formal action (a) early engagement with TPR, and (b) the openness of that engagement.
It seems that the trustee's approaching TPR in a timely way was instrumental (TPR never likes being rushed), and presumably it was the sponsor Reach plc which was open with TPR as to its financial position. When TPR's new regime came into force these two principles were also highlighted, and TPR seems glad to illustrate these principles in practice.
It might have been helpful to know (a) what power TPR was contemplating using (presumably s231 but this is not explained), (b) why it regarded the potential use of its powers as reasonable in the circumstances (the scheme will be fully funded by 2028 and its not clear what other factors existed), and (c) why Reach Plc had not made the financial commitments it eventually made earlier. Nevertheless, these are irrelevant to the point TPR wants to make.
TPR doesn't publish an RIR in each case it engages in. By publishing the RIR of this case, TPR wanted to illustrate how it would rather pursue measured interventions, secure a settlement with employers/funders, perhaps with a warning that they may be back for more if the commitments are not kept.
Anecdotally, this is what many are also seeing play out in practice. At least for the moment, the industry has been spared repeats of full-scale fights such as Silentnight, Box Clever, and Nortel. TPR has instead focused on prosecutions of scammers, fraudsters, and auto-enrolment failures. When one considers the direct and immediate impact on individual savers and pensioners, this seems eminently justified.
Chris Edwards-Earl is a partner at Stephenson Harwood
