TPR’s consultation on consolidated draft enforcement policy and updated prosecution policy aims to provide greater transparency on enforcement and prosecution
Pensions analysis: The Pensions Regulator (TPR) has published its consultation response and draft enforcement policy, consolidating previous policies and helping to make the enforcement powers clearer through more streamlined policy documents. Following the response, TPR has launched a further consultation on its draft enforcement and prosecution policy. Chris Edwards-Earl, senior associate at Stephenson Harwood analyses the consultations and its implications for pensions schemes.
TPR launched a consultation last autumn regarding the way in which it would exercise its enhanced powers under the Pensions Schemes Act 2021. This consultation considered new policies regarding overlapping powers, monetary penalty powers and information gathering powers. Some respondents to that consultation requested greater detail and clarification on TPR’s approach as well as queries over how the new powers sit alongside the use of TPR’s existing powers. On 4 May 2022, TPR issued its consultation response and launched a further consultation into a new draft enforcement policy document and an updated prosecution policy, designed to address these requests for clarity.
David Fairs, TPR’s Executive Director of Regulatory Policy, said:
‘We want to be clear with the pensions industry about our approach to enforcement and prosecution. With our new powers to help us ensure savers’ money is secure, we felt it was timely to review our existing policies and consolidate them where possible, so they are easier to navigate.’
Key aspects of consultation
TPR’s draft enforcement policy consolidates previous policies for defined benefit, hybrid, public sector pension schemes and defined contribution pension schemes. This helps to make the enforcement powers clearer through more streamlined policy documents.
TPR’s approach to overlapping powers and information gathering has been incorporated as chapters in the draft enforcement policy but are in final form and do not form part of the new consultation. On overlapping powers, the draft enforcement policy sets out the different factors that TPR will consider when deciding which powers are appropriate to exercise, guidance on how those factors might be weighed up, and case study examples. It notes that generally TPR does not expect to pursue criminal proceedings and financial penalty proceedings against the same target for the same act. However, where TPR chooses to pursue a financial penalty, it may later pursue criminal proceedings if the act or conduct continues or new evidence emerges which makes this appropriate. Therefore, unsurprisingly, civil penalties will lead the way.
TPR’s approach is said to be focused on assessment of risks and harm to schemes (including future anticipated harm), the size of the scheme, the type of breach, the number of members, compliance history and previous interactions with TPR.
TPR’s existing enforcement policies for auto-enrolment and master trust authorisation were not included in the draft policies being consulted on. These sections have not been changed and will continue to operate separately.
The draft was issued alongside new and separate policy documents setting out TPR’s approach to monetary penalties, one each for ‘avoidance-type penalties’ and ‘information requirements penalties’, in respect of the new powers meaning that TPR can issue high fines of up to £1mn.
Implications and next steps
These policies do not necessarily create new policies but bring TPR’s policies up to date and consolidate them. The draft enforcement policy brings all enforcement-related content into a single enforcement policy. This provides links to other relevant policies and procedures such as case procedures and monetary policies policy, helping to create a more cohesive reading of TPR policies. This is likely to benefit smaller pensions schemes trustees and scheme managers, without external advisors, who find TPR policies complex and difficult to follow.
The repeated reference to compliance and engagement with TPR reiterates that adherence to the widened notifications regime is going to be important for targets in later defending against TPR investigations. For example, TPR uses the example of a finance director of an employer (who is also a trustee) failing to inform TPR of an employer-related notifiable event. TPR says this would be judged less harshly provided the employer is engaging with TPR more generally.
It will take some time before we see whether TPR actually adheres to these policies in practice, and how useful they are for advising clients. However, so far, industry reaction has been positive that TPR has used this as an opportunity to both consolidate and clarify its guidance.
The consultation ends 24 June 2022 and TPR expects to publish the final enforcement and prosecution policies later in the year. Responses should be on ‘TPR’s standardised form’ published as part of the consultation and must be made by 24 June 2022 to PSA21policies@tpr.gov.uk.