Compliance, enforcement & penalties: a warning to trustees

Topic:

Hot topic

Date published:

Thursday, 6 July 2017

Author:

James Double

With two new compliance and enforcement bulletins issued on the same day, the Pensions Regulator (tPR) is making it clear pension trustees who fail in their duties will face penalties. The topics covered in tPR’s statements were two core pension scheme governance requirements - the scheme return and the chair’s statement for defined contribution (DC) schemes.

They highlight a worrying lack of governance and understanding of trustee responsibilities for some smaller pension schemes (under 100 members). Trustees of these schemes are more likely to fail to comply, with many indicating they were not aware of the chair’s statement requirements.

If they are unaware of these very well-publicised requirements, what else is being overlooked?

The second case study given by tPR - a small scheme with an insurer and independent financial adviser (IFA) assisting the pension trustees with governance - does not surprise me. The trustees' excuse for not producing a chair’s statement was:

1. They had been a pension trustee for a number of years and not had to complete a chair’s statement in the past!
2. The insurer and their financial adviser had not told them about the requirement before they completed the scheme return!

This really is bad. Trustees cannot simply abdicate their responsibility for knowing the regulations. They should be keeping their trustee knowledge & understanding (TKU) up to date.

It makes me wonder whether there are many other schemes who stated on the scheme return they have completed a chair’s statement when they haven’t. Perhaps tPR will start asking pension trustees for a copy of their chair’s statements to check compliance.

Employers with small schemes and tight budgets can be nervous of appointing a professional trustee who can help ensure penalty-free compliance and manage their scheme more effectively. Many see it as an additional layer of cost, which they believe they cannot afford. That’s not looking at the whole picture.

We act as professional pension trustee for a number of small schemes including those with under a 100 lives. Our remit includes managing scheme budgets and getting the best value out of advisers by focusing them on the key issues. This means scheme governance improves without increasing (and often reducing) the overall spend on advisory fees. Happy employer, happy regulator, happy scheme members!

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