As new expanded powers for the Pensions Regulator (TPR) come into force in a few days on the 1st October, LCP are warning sponsors and trustees of DB pension schemes to factor these new risks into business decision making and for companies to take five crucial actions to avoid potentially criminal penalties.
According to LCP Board training, governance and communication are among the key things that companies and company directors need to get right to avoid the risk of a TPR investigation which could lead to criminal or civil proceedings. From tomorrow, the Regulator’s new powers include two new criminal offences, an expanded set of financial penalties and new interview and inspection powers. This means there will be a much bigger spotlight on corporate activity.
Based on figures from a DWP impact assessment, this time next year we expect to have seen the first 5 to 50 civil sanctions, and up to 5 criminal convictions under the new powers.
The five key actions which LCP are recommending should be taken now are:
- Company Board training on the new powers: Ensure the Company Board is aware of the new TPR powers and requirements and especially the additional corporate and personal risks of the new criminal offences, financial penalties and Contribution Notice tests.
- Review governance: Schemes need to put in place checks around key business decisions which may impact on the covenant support to the pension scheme (including dividends). This might involve seeking external specialist pension covenant support, to ensure management is in a position to be able to assess the impact of key business decisions on the pension scheme in advance.
- Documentation and communication: Consider how the pension checking process will be documented, and how the outcome of the impact assessment on the scheme will be communicated to key decision makers within the business and to the trustees.
- Information sharing: Implementing or updating the information sharing agreement with trustees to ensure the Company is providing the right information at the right time around specific agreed events.
- Regulatory reporting requirements: Consider potential interaction with the new Notifiable Event and the Statement of Intent requirements, and ensure that directors understand the thresholds for notification and the required timescales.
LCP are holding a webinar on the 15th October to delve deeper into the new powers and help company and trustee boards better understand what they need to do.
Commenting, Laura Amin, principal at LCP said: “These new powers have been a long time coming and many sponsors and trustees will have felt overwhelmed with the raft of consultations and requirements that have been published since the Pension Schemes Act became law earlier this year.
With the new powers raising the bar when it comes to TPR’s oversight of corporate activity, schemes need to tread carefully and cautiously to avoid falling foul of the rules. Companies and Trustees will need to know all the detail of the new regulatory boundaries and have robust governance processes in place and records of decision-making. As the DWP figures highlight, criminal sanctions will be a reality under the new rules.”
“Following these five steps may seem excessive when there are so many other business priorities. But getting things right in the early days of these new powers being effective will save time and potentially reputations further down the line.”