UK: Pensions Regulator Activism

Last Updated: 16 October 2017
Article by Laura Cooke, Mark Howard and Matthew Ambler

The Pensions Regulator has extensive powers at its disposal and may be on course to receive even further tools shortly, when the Department for Work and Pensions publishes its White Paper on defined benefits this autumn. Recent evidence suggests that the Pensions Regulator is already making good use of its powers and this is only set to increase.

Yachts have been catalysts in the evolution of UK pension regulation. Robert Maxwell's fall from the Lady Ghislaine in 1991 started the process which eventually led to the Pensions Act 1995 and the creation of the Occupational Pensions Regulatory Authority, the forerunner of the Pensions Regulator.

More recently, images of Sir Philip Green and his wife on board their yacht following the collapse of BHS triggered calls from politicians (most notably Frank Field) for the Pensions Regulator to make effective use of its regulatory powers. Images of Sir Philip and Lady Green sailing the Mediterranean while employees were being warned that they may not receive the full benefits due from the BHS pension scheme, did not play well with the public.

During the Parliamentary sessions looking at the BHS situation, the Pensions Regulator asked to be given more powers. Regulators always welcome more powers, so the call was not entirely surprising and the White Paper, due in the autumn, may see the Regulator getting its wish. Yet the Pensions Regulator already has an impressive array of powers at its disposal. Recent evidence suggests that it has started to appreciate the extent of these powers and what they can achieve and is more ready to use them.

Increased use of the powers

Figures issued by the Pensions Regulator for the second quarter of 2017 (April to June) make for interesting reading. In that period:

  • 28 penalties (of between £500 up to £2,000) were issued for failing to complete a chair's statement.This represents nearly 1 in 4 of this type of penalty ever issued since the requirement was introduced in April 2015.
  • 44 penalties (ranging from £50 to £1,000, but which can be up to £5,000 for an individual and £50,000 for a corporate body) were issued for failing to submit the relevant information needed for a scheme return. This represents nearly 50% of the total issued in the previous three years.

Even public sector arrangements are finding themselves under the spotlight. In March, the managers of the London Borough of Barnet's Fund in the Local Government Pension Scheme were fined £1,000 for failing to submit their scheme return. 

The Pensions Regulator has wide ranging powers to ask for information about pension arrangements under section 72 Pensions Act 2004. These powers have been used on 372 occasions between April 2014 and June 2017, and are often a preliminary step in investigating whether there are other powers which can be used (such as the moral hazard powers which allow the Pensions Regulator to seek contribution notices and financial support directions).

Failing to respond to a section 72 request can end with prosecution in the courts.

  • Dominic Chappell, who purchased BHS from Sir Philip Green, appeared before Brighton Magistrates Court on 20 September 2017 to explain why he has neglected or refused to provide information or documents to the Pensions Regulator.
  • In April, a solicitor and his firm were fined £4,000 and £2,700 respectively (plus costs totalling £10,000 and victim surcharges of £240) for failing to produce documents requested under a section 72 request for 9 months (Regulatory Action – Ashley Wilson Solicitors LLP ). The information was eventually obtained under a search warrant in March 2016.
  • Again in April, a company director was fined £2,500 (plus costs of £4,000 and a £120 victim surcharge) for not providing information under a second section 72 request (Regulatory Action – Patrick John McLarry). Mr McLarry claimed that the information would have been incriminating and was protected under French privacy laws. This highlights a potential minefield of disclosure conflicting with confidentiality laws.

In our experience, some section 72 requests are fishing expeditions. There can be legitimate concerns about providing what is requested and legally privileged documents cannot be demanded. However, ignoring the request is never a good idea. 

Where there are concerns about what is being sought, recipients should take legal advice. Good advice will ensure recipients avoid the penalties, but also structure the response in a way which deals with any concerns about its scope.

Contract based schemes – and automatic enrolment duties

It is not only trust based pension schemes which are coming under greater scrutiny. The Pensions Regulator has many powers in connection with employer obligations to contribute to a pension arrangement.

As the automatic enrolment duties have applied to more – and smaller – employers, there has been an increase in the use of the powers to enforce the duties.

In recent months, employers in several UK cities (including Birmingham, Edinburgh, Glasgow, Manchester and Sheffield), and most recently in South Wales, have been spot checked by the Pensions Regulator to confirm they are complying with their automatic enrolment duties.  The Pensions Regulator is authorised to make such inspections under section 74 Pensions Act 2004. 

Again, the recent figures issued by the Pensions Regulator are interesting reading:

  • In the second quarter of 2017 (April to June), 276 premises were inspected.This is nearly 50% of the total number of inspections ever carried out.
  • Over 49,000 compliance notices have been issued since the automatic enrolment duties started to be rolled out in October 2012.
  • Since October 2012, 19,300 fixed notice penalties of £400 have been issued (nearly 1 in 4 of these in the period between April and June), along with 3,900 of the daily escalating penalties of between £50 and £10,000 per day (over 1 in 3 of these in the period between April and June).

As there are estimated to be over 1.1 million employers in the UK, the figures need to be put into context. They do, however, demonstrate a regulator which has systems in place to enforce its powers and is increasingly willing to do so. For small employers struggling with the automatic enrolment duties, fixed penalties of £400, escalating daily penalties and obligations to make good underpaid pension contributions may make the difference between profit and loss – and ultimately survival.

The Pensions Regulator has also recently announced its first prosecution for wilful failure to comply with automatic enrolment.


Despite asking for further powers, it is clear that the Pensions Regulator is already making effective – and greater - use of its existing powers. Everyone responsible for any employer pension arrangement should ensure there are robust and appropriate governance structures in place to manage the risks. In 2017 it is not just yacht owners who are in the spotlight.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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