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Pension Schemes Act 2021

Contents

Part 3: The Pensions Regulator

Contribution notices where avoidance of employer debt etc

Section 103: Grounds for issuing a section 38 contribution notice

  1. This section amends section 38 of the Pensions Act 2004 to include two new tests to enable the Pensions Regulator to issue section 38 contribution notices – the "employer insolvency test" and the "employer resources test" and their respective statutory defences.
  2. Subsection (3) of the section inserts new sections 38C and 38D into the Pensions Act 2004 to provide the meaning of the "employer insolvency test" and the corresponding defence.
  3. Subsection (4) of the section inserts new sections 38E and 38F into the Pensions Act 2004 to provide the meaning of the "employer resources test" and the corresponding defence.
S38C: Section 38 contribution notice: meaning of "employer insolvency test"
  1. Subsection (1) of new section 38C, the "employer insolvency test", enables the Regulator to issue a contribution notice where it is of the opinion that:
  • immediately after an act, or failure to act, the value of the assets of the scheme was less than the liabilities of the scheme, and
  • if a debt under section 75(4) of the Pensions Act 1995 had fallen due immediately after the relevant time, the act or failure to act would have materially reduced the amount that could be recovered by the trustees or managers from the employer in the case of a hypothetical insolvency of the employer.
  1. Subsection (2) sets out that the value or amount of (i) the assets of the scheme, (ii) the liabilities of the scheme, and (iii) the debt that would have fallen due under section 75(4) of the Pensions Act 1995, will be the Regulator’s estimate as at immediately after the relevant time.
  2. Subsection (3) states that when estimating the value and the amounts referred to in subsection (2), the Regulator must take into account how the liabilities and assets and their value or amount of the employer are determined and calculated for the purposes of section 75(4) of the Pensions Act 1995.
  3. Subsection (4) provides that any debts due under section 75 of the Pensions Act 1995 immediately after the relevant time are to be disregarded for the purpose of the test.
  4. Subsection (5) defines "the relevant time".
S38D: Section 38 contribution notice issued by reference to employer insolvency test: defence
  1. New section 38D provides a defence in respect of new section 38C.
  2. Subsection (1) of the new section 38D applies where the Regulator believes that the conditions of new section 38C have been met, and a warning notice in respect of a contribution notice under section 38 of the Pensions Act 2004 has been issued, wholly or partly because in its opinion the employer insolvency test has been met.
  3. Subsections (2) and (3) provide that where a defence has been raised, a contribution notice must not be issued if the Regulator is satisfied that certain conditions under this section are met.
  4. Subsections (4) to (6) set out the conditions A to C for the defence: this provides that the person who wishes to raise the defence must satisfy the Regulator that he or she has met conditions A and C, and where relevant condition B. Those conditions provide for a three-step process.
  5. Condition A is that, before becoming a party to the act or failure, the person gave due consideration to the extent to which, if a debt under section 75(4) of the Pensions Act 1995 were to fall due from the employer to the scheme either (i) immediately after the act or failure, or (ii) where the failure might continue for a period of time, at any time within that period, the act or failure to act might materially reduce the amount of the debt that could be recovered from the employer when it so fell due.
  6. Condition B is that where, as a result of the consideration as outlined under condition A, the person took all reasonable steps to eliminate or minimise the potential for the act or failure to act to have such an effect.
  7. Condition C is that, having regard to all circumstances prevailing at the time of the act or at the time when the failure to act first occurred, it was reasonable for the person to conclude that, if a debt under section 75(4) of the Pensions Act 1995 were to fall due from the employer to the scheme either (i) immediately after the act or failure, or (ii) where the failure might continue for a period of time, at any time within that period, the act or failure to act would not materially reduce the amount of that debt that could be recovered from the employer when the debt fell due.
  8. Subsection (7) sets out condition D of the defence which provides that the person who wishes to raise the defence must satisfy the Regulator that immediately after the relevant time, the value of the assets of the scheme equalled or was more than the amount of the liabilities of the scheme immediately after the relevant time.
  9. Subsection (8) gives further detail about what will be required in order for a person to be regarded as having given the consideration referred to in condition A. This is that the person must have made enquiries and done the other acts that a reasonably diligent person would have made or done in the circumstances.
  10. Subsection (9) sets out that the person’s assessment of whether or not an act or failure to act might materially reduce the amount of debt that could be recovered from the employer in a hypothetical insolvency situation, is to be judged by reference to the circumstances prevailing at that time and of which that person was aware or ought reasonably to have been aware at the time of the act or the time when the failure to act first occurred. This includes acts or failures to act which have occurred before that time and expectations at that time of other acts of failures to act occurring.
  11. Subsection (10) provides that, for the purposes of conditions A, C and D, any debt due from the employer under section 75 of the Pensions Act 1995 (whether before or after the relevant time) is to be disregarded.
  12. Subsections (11) to (14) set out how the defence applies in relation to a series of acts or failures to act.
  13. Subsection (11) provides that the person must show either that the three conditions are met in relation to each of the acts or failures in the series, or that in relation to each of those acts or failures, it formed part of a group of acts or failures (as selected by the person raising the defence) in relation to which the matters set out in subsection (12) are shown.
  14. Subsection (12) sets out the matters to be shown in order to meet conditions A, B and C in relation to a group of acts. They are that before becoming party to the first act or failure in the group, the person must show that condition A is met in relation to the overall effect of the group; condition B must be met in relation to that overall effect, and condition C must be met in relation to each of the acts or failures in the group.
  15. Subsection (13) provides that if at any time the person considers that condition C will not be met in relation to any particular act or failure to act in the group, the previous acts or failures in the group are to be regarded as a separate group for the purposes of subsection (11) of this section, and the person may then select another group consisting of the particular act or failure concerned, and any subsequent act or failure, in relation to which the person shows the matters mentioned in subsection (12) of new inserted section 38D.
  16. Subsection (14) states that if the person is unable to show in the case of each of the acts or failures to act in the series that the matters set out in subsection (11)(a) or (11)(b) are met, but does show in the case of some of them that those matters are met, the acts or failures to act within paragraph (b) are not to count for the purposes of new section 38C as acts or failures to act in the series.
  17. Subsection (15) provides the definition of terms used in this section, including "the relevant time" and "a warning notice". It also sets out that a reference to a party to an act or failure to act includes a reference to a person who knowingly assists in the act or failure.
S38E: Section 38 contribution notice: meaning of "employer resources test"
  1. Subsection (1) of new section 38E, the "employer resources test", enables the Regulator to issue a contribution notice where it is of the opinion that:
  • the act or failure to act reduced the value of the resources of the employer, and
  • that reduction was a material reduction relative to the estimated section 75 debt in relation to the scheme.
  1. Subsection (2) provides regulation making powers to enable the Secretary of State to specify what constitutes the resources of the employer, and how the value of the employer’s resources is to be determined, calculated and verified.
  2. Subsection (3) sets out the meaning of "estimated section 75 debt".
  3. Subsection (4) provides that any actual debts due from the employer under section 75 of the Pensions Act 1995 at the relevant time are to be disregarded for the purpose of the test.
  4. Subsection (5) defines "the relevant time".
S38F: Section 38 contribution notice issued by reference to employer resources test: defence
  1. New section 38F provides a defence in respect of new section 38E.
  2. Subsection (1) of new section 38F applies where the Regulator believes that the conditions of new inserted section 38E have been met, and a warning notice in respect of a contribution notice under section 38 of the Pensions Act 2004 has been issued wholly or partly because in its opinion, the employer resources test has been met.
  3. Subsection (2) provides that where a defence has been raised, a contribution notice must not be issued if the Regulator is satisfied that certain conditions under this section are met.
  4. Subsections (3) to (5) set out the conditions for the defence: this provides that the person who wishes to raise the defence must satisfy the Regulator that he or she has met conditions A and C, and where relevant condition B. Those conditions provide for a three step process.
  5. Condition A is that before becoming a party to the act or failure, the person gave due consideration to the extent to which the act or failure to act might reduce the value of the resources of the employer relative to the estimated section 75 debt.
  6. Condition B is that where, as a result of the consideration outlined in condition A, the person took all reasonable steps to eliminate or minimise the potential for the act or failure to have such an effect.
  7. Condition C is that, having regard to all circumstances prevailing at the time of the act or at the time when the failure to act first occurred, it was reasonable for the person to conclude that the act or failure to act would not reduce the value of the resources of the employer and would also not materially reduce the value of the resources of the employer relative to the estimated section 75 debt.
  8. Subsection (6) gives further detail about what will be required in order for a person to be regarded as having given the consideration referred to in condition A. This is that the person must have made enquiries and done the other acts that a reasonably diligent person would have made or done in the circumstances.
  9. Subsection (7) sets out that the person’s assessment of whether or not an act or failure might materially reduce the value of the resources of the employer, is to be judged by reference to the circumstances prevailing at that time and of which that person was aware or ought reasonably to have been aware at the time of the act or the time when the failure to act first occurred. This includes acts or failures to act which have occurred before that time and expectations at that time of other acts or failures to act occurring.
  10. Subsection (8) provides that, for the purposes of conditions A and C, the "estimated section 75 debt" means:
    1. the amount which a reasonable estimate of the amount of the debt which would become due from the employer to the trustees or managers of the scheme under section 75 if section 75(2) applied, and the time designated by the trustees or managers of the scheme for the purposes of section 75(2) were the time immediately before the act occurred or the failure to act first occurred; and
    2. the amount of any debt due at the time in question from the employer under section 75 of the Pensions Act 1995 is to be disregarded.
  11. Subsections (9) to (12) set out how the defence applies in relation to a series of acts or failures to act.
  12. Subsection (9) provides that the person must show either that the three conditions are met in relation to each of the acts or failures in the series, or that in relation to each of those acts or failures, it formed part of a group of acts or failures (as selected by the person raising the defence) in relation to which the matters set out in subsection (10) are shown.
  13. Subsection (10) sets out the matters to be shown to meet conditions A, B and C in relation to a group of acts. They are that before becoming party to the first act or failure in the group, the person must show that condition A is met in relation to the overall effect of the group, condition B must be met in relation to that overall effect, and condition C must be met in relation to each of the acts or failures in the group.
  14. Subsection (11) provides that if at any time the person considers that condition C will not be met in relation to any particular act or failure to act in the group, the previous acts or failures in the group are to be regarded as a separate group for the purposes of subsection (9), and the person may then select another group consisting of the particular act or failure concerned and any subsequent act or failure, in relation to which the person shows the matters mentioned in subsection (10).
  15. Subsection (12) states that if the person is unable to show in the case of each of the acts or failures to act in the series that the matters set out in subsection (9)(a) or (b) are met, but does show in the case of some of them that those matters are met, the acts or failures to act within paragraph (b) are not to count for the purposes of new section 38E as acts or failures to act in the series.
  16. Subsection (13) provides the definition of terms used in this section, including "a warning notice" and "party to an act or failure to act". It also sets out that section 38E(2) (the resources of the employer and their value) has effect for the purpose of this section as it has effect for the purposes of section 38E.

Section 104: Reasonableness of issuing a contribution notice

  1. This section amends section 38 of the Pensions Act 2004 by inserting two new factors for the Regulator to consider when ascertaining if it is reasonable to issue a contribution notice.
  2. Subsection (2) amends section 38(7) of the Pensions Act 2004 to add the failure of a person to comply in respect of notices and accompanying statements under section 69A of the Pension Act 2004 as one of the matters the Regulator can take into account when considering if it is reasonable to impose liability on someone to pay a contribution notice sum.
  3. Subsection (3) of the section introduces a new factor which provides that the Regulator may consider the effect of the act or failure to act on the value of the assets or liabilities of the scheme.
  4. Subsection 4 of section 104 provides the meaning of "relevant transferee scheme".

Section 105: Determination of sum specified in a contribution notice

  1. This section amends section 39 of the Pensions Act 2004 by changing the date at which the shortfall sum, in respect of a contribution notice, will be calculated.
  2. Subsection (2) amends section 39(4) of the Pensions Act 2004 to set the "relevant time" of the shortfall sum in relation to a scheme to be the end of the most recent scheme year prior to the issuing of a determination notice.
  3. Subsection (3) omits subsection (4A) of section 39 of the Pensions Act 2004.

Section 106: Sanctions for failure to comply with a contribution notice

  1. This section amends the Pensions Act 2004. Subsection (2) amends section 40 (content and effect of a section 38 contribution notice). Subsection (3) amends section 41 of the Pensions Act 2004 (section 38 contribution notice: relationship with employer debt). Subsection (4) of this section inserts new section 42A (Offence for failing to comply with section 38 contribution notice). Subsection (5) of this section inserts new section 42B (Financial penalty for failure to comply with a section 38 contribution notice).
Section 40 (content and effect of a section 38 contribution notice)
  1. Subsection (2) of this section amends section 40 of the Pensions Act 2004 to insert new subsection (2A) and amend existing subsection (9) to require that a contribution notice issued under section 38 of the Pensions Act 2004 must specify a date for compliance.
Section 41 (section 38 contribution notice: relationship with employer debt)
  1. Subsection (3) of this section amends section 41 of the Pensions Act 2004 to insert new subsections (8A), (10A), (11A) and (11B).
  2. Subsection (3)(a) inserts the new subsection (8A) which states that an application for review under section 41(7) may not be made after the date specified in the contribution notice pursuant to new sections 40(2A) for the purposes of sections 42A(2) (the date specified for compliance with a section 38 contribution notice) and 42B(2) (the date specified for compliance with a revised section 38 contribution notice), or such a date as has effect instead of that date (see subsections (10A) and (11B)).
  3. Subsection (3)(b) inserts the new subsection (10A) which specifies that if an application for review is made under section 41(7), the Regulator may change the date for compliance in either a contribution notice issued under section 38 of the Pensions Act 2004 or an earlier revised contribution notice, and specify the revised date in the revised contribution notice. Alternatively, if the Regulator does not issue a revised contribution notice under section 41(9)(b), the Regulator may issue a revised contribution notice specifying the revised date for compliance.
  4. Subsection (3)(c) of this section inserts new subsections (11A) and (11B). Newly inserted subsection (11A) provides that subsection (11B) applies where a contribution notice has been issued to more than one person under section 38 of the Pensions Act 2004 imposing joint and several liability to pay the debt with other persons, and the Regulator issues a revised contribution notice specifying a revised date for compliance.
  5. Newly inserted subsection (11B) states that where this subsection applies, the Regulator must change the date for compliance in the contribution notices or revised contribution notices to all those jointly and severally liable for the debt specified in the contribution notice, and must also specify the revised date for compliance. Alternatively, if the Regulator does not issue a revised contribution notice under subsection (11), the Regulator must issue revised contribution notices to all parties jointly and severally liable specifying the revised date for payment.
42A Offence of failing to comply with a section 38 contribution notice
  1. Subsection (4) of this section inserts new section 42A into the Pensions Act 2004.
  2. Subsection (1) of new section 42A states that this section applies where a contribution notice is issued to a person under section 38 of the Pensions Act 2004.
  3. Subsection (2) outlines the parameters of the offence, that if a person fails to comply with a contribution notice without a reasonable excuse, then they are guilty of an offence.
  4. Subsection (3) outlines that a person guilty of the offence is liable to a fine on summary conviction.
  5. Subsection (4) provides that proceedings for an offence may not be instituted if an application has been made under section 41(7) of the Pensions Act 2004, and the application has not been determined, withdrawn or abandoned. To note, section 41(7) allows for a person to apply to the Regulator for a reduction in the specified amount in a contribution notice issued under section 38 of the Pensions Act 2004, where a sum has been paid by the employer in respect of a debt under section 75 of the Pensions Act 1995, either to the trustees/managers of the scheme, or to the Board of the Pension Protection Fund.
  6. Subsection (5) provides that the proceedings of an offence under subsection (2) can only be commenced by the Regulator, Secretary of State, or by or with the consent of the Director of Public Prosecutions in England and Wales.
42B Financial penalty for failure to comply with a section 38 contribution notice
  1. Subsection (5) of this section inserts new section 42B into the Pensions Act 2004.
  2. Subsection (1) of the new section 42B states that this section applies where a contribution notice is issued to a person under section 38 of the Pensions Act 2004.
  3. Subsection (2) outlines the parameters of the offence, that if a person fails to comply with a contribution notice, and does not have a reasonable excuse, then the financial penalty in section 88A of the Pensions Act 2004 applies.
  4. Subsection (3) provides that the Regulator cannot issue a warning notice in respect of the civil penalty as it applies by virtue of subsection (2), if an application has been made under section 41(7) of the Pensions Act 2004 and the application has not been determined, withdrawn or abandoned.
  5. Subsection (4) provides the meaning of "warning notice."

Sanctions for avoidance of employer debt etc

Section 107: Sanctions for avoidance of employer debt etc

  1. This section inserts new provisions in the Pensions Act 2004 to introduce new criminal offences and financial penalties for the avoidance of employer debt.
  2. Subsection (2) of this section creates two new offences including: section 58A: an offence for avoidance of employer debt and section 58B: an offence for conduct risking accrued scheme benefits.
  3. Subsection (3) of this section also creates two new civil penalties including: section 58C: a financial penalty for avoidance of employer debt and section 58D: a financial penalty for conduct risking accrued scheme benefits.
S58A: Offence of avoidance of employer debt
  1. Subsection (1) of new section 58A states that it applies to occupational pension schemes other than money purchase schemes and other schemes as prescribed.
  2. Subsection (2) of new section 58A provides that a person commits an offence under this section only if:
    1. the person does an act or engages in a course of conduct that:
      1. prevents the recovery of the whole or any part of a debt due from the employer under section 75 of the Pensions Act 1995,
      2. prevents such a debt becoming due,
      3. compromises or otherwise settles such a debt, or
      4. reduces the amount of such a debt which would otherwise become due,
    2. the person intended the act or course of conduct to have such an effect, and
    3. the person did not have a reasonable excuse for doing the act or engaging in that course of conduct.
  3. Subsection (3) outlines that a reference in this section to an act or course of conduct includes a failure to act.
  4. Subsection (4) provides that the offence does not apply to a person who is acting in accordance with their function as an insolvency practitioner.
  5. Subsection (5) sets out that, for the purposes of this section, a debt due under section 75 of the Pensions Act 1995 includes a contingent debt under that section.
  6. Subsection (6) further sets out that in the case of such a contingent debt, the reference in subsection (2)(b) of this section, to preventing a debt becoming due is to be read as including a reference to preventing the occurrence of any of the events specified in section 75(4C)(a) or section 75(4C)(b) of the Pensions Act 1995 upon which the debt is contingent.
  7. Subsection (7) provides details of the sanction that a person guilty of an offence under this section is liable for. Subsection (7)(a) provides that on summary conviction in England and Wales, a person is liable to a fine. Subsection (7)(b) provides that in Scotland, a person is liable to a fine not exceeding the statutory maximum. Subsection (7)(c) provides that on conviction on indictment, a person is liable to imprisonment for a term not exceeding seven years, a fine, or both.
  8. Subsection (8) states that proceedings for an offence under this section may be instituted in England and Wales only by the Regulator or the Secretary of State, or by or with the consent of the Director of Public Prosecutions.
  9. Subsection (9) defines "insolvency practitioner" for the purposes of sections 58A to 58D to the Pensions Act 2004.
S58B: Offence of conduct risking accrued scheme benefits
  1. Subsection (1) of new section 58B states that this section applies to occupational pension schemes other than money purchase schemes and other schemes as prescribed.
  2. Subsection (2) provides that a person commits an offence under this section only if:
    1. the person does an act or engages in a course of conduct that detrimentally affects in a material way the likelihood of accrued scheme benefits being received,
    2. the person knew or ought to have known that the act or course of conduct would have that effect, and
    3. the person did not have a reasonable excuse for doing the act or engaging in the course of conduct.
  3. Subsection (3) sets out that a reference in this section to an act or a course of conduct includes a failure to act.
  4. Subsection (4) states that any reference in this section to accrued scheme benefits being received means benefits the rights to which have accrued by the relevant time being received by, or in respect of, the persons who were scheme members before that time.
  5. Subsection (5) defines "the relevant time" for the purposes of this section as the end of the period of time during which the conduct producing the detrimental effect continued or, in any other case, the time of the conduct.
  6. Subsection (6) states that a reference in this section to rights which have accrued is to be read in accordance with sections 67A(6) and (7) of the Pensions Act 1995. Section 67 of the Pensions Act 1995 applies whenever a power to modify an occupational pension scheme is exercised to make a change which would, or might, adversely affect a member’s subsisting rights. Sections 67A(6) and (7) outline the meaning of subsisting rights. Subsisting rights means any entitlement to benefits, or right to future benefits, which a member has at that time under the scheme rules. Sections 67A(6) and (7) also outline the meaning of subsisting rights in respect of the survivor of a scheme member, and where the pensionable service of a member of an occupational pension scheme is continuing.
  7. Subsection (7) provides that under this section, benefits that may be received under Chapter 3 of Part 2 and section 286 of the Pensions Act 2004 are to be disregarded. These are respectively benefits received under the Pension Protection Fund and the Financial Assistance Scheme.
  8. Subsection (8) provides that the offence does not apply to a person who is acting in accordance with their function as an insolvency practitioner. "Insolvency practitioner" is defined in accordance with section 58A(9) of the Pensions Act 2004.
  9. Subsection (9) provides details of the sanction that a person guilty of an offence under this section is liable for. Subsection (9)(a) provides that on summary conviction in England and Wales, a person is liable to a fine. Subsection (9)(b) provides that in Scotland, a person is liable to a fine not exceeding the statutory maximum. Subsection (9)(c) provides that on conviction on indictment, a person is liable to imprisonment for a term not exceeding seven years, a fine, or both.
  10. Subsection (10) states that proceedings for an offence under this section may be instituted in England and Wales only by the Regulator or the Secretary of State, or by or with the consent of the Director of Public Prosecutions.
S58C: Financial penalty for avoidance of employer debt
  1. Subsection (1) of new section 58C states that it applies to occupational pension schemes other than from money purchase schemes and other schemes as prescribed.
  2. Subsection (2) enables the Regulator to issue a financial penalty under section 88A of the Pensions Act 2004 to a person for avoidance of employer debt. The subsection provides that the Regulator can issue the penalty if the person was party to an act or failure where the main purpose was to:
    1. prevent the recovery of the whole or any part of a debt due from the employer under section 75 of the Pensions Act 1995,
    2. prevent such a debt becoming due,
    3. compromise or otherwise settle such a debt, or
    4. reduce the amount of such a debt which would otherwise become due,
      5. and it was not reasonable for the person to act or fail to act in the way that the person did.
  3. Subsection (3) provides that the penalty does not apply to a person who is acting in accordance with their function as an insolvency practitioner. "Insolvency practitioner" is defined in accordance with section 58A(9) of the Pensions Act 2004.
  4. Subsection (4) sets out that, for the purposes of this section, a debt due under section 75 of the Pensions Act 1995 includes a contingent debt under that section.
  5. Subsection (5) further sets out that in the case of such a contingent debt, the reference in subsection 2(b), of this section, to preventing a debt becoming due is to be read as including a reference to preventing the occurrence of any of the events specified in section 75(4C)(a) or section 75(4C)(b) of the Pensions Act 1995 upon which the debt is contingent.
  6. Subsection (6) of new section 58C outlines that for this section, parties to an act or deliberate failure to act include persons who knowingly assist in the act.
  7. Subsection (7) of new section 58C provides that where the Regulator is of the opinion that a person was party to a series of acts or failures to act, and the requirements of subsection (2) are met in relation to the series, the series of acts or failures to act is to be regarded as an act or failure in relation to which the requirements of subsection (2) are met.
S58D: Financial penalty for conduct risking accrued scheme benefits
  1. Subsection (1) of new section 58D states that it applies to occupational pension schemes other than money purchase schemes or other schemes as prescribed.
  2. Subsection (2) enables the Regulator to issue a financial penalty under section 88A of the Pensions Act 2004 to a person for conduct risking accrued scheme benefits. The subsection provides that the Regulator can issue the penalty if the person was party to an act or deliberate failure to act which detrimentally affected in a material way the likelihood of accrued scheme benefits being received if:
    1. the person knew or ought to have known that the act or failure to act would have that effect, and,
    2. it was not reasonable for the person to act or fail to act in the way that the person did.
  3. Subsection (3) provides that the offence does not apply to a person who is acting in accordance with their function as an insolvency practitioner. "Insolvency practitioner" is defined in accordance with section 58A(9) of the Pensions Act 2004.
  4. Subsection (4) states that any reference in this section to accrued scheme benefits being received means benefits the rights to which have accrued by the relevant time being received by, or in respect of, the persons who were scheme members before that time.
  5. Subsection (5) outlines that in this section, the relevant time means: the end of the period of time during which the conduct producing the detrimental effect continued or, in any other case, the time of the conduct.
  6. Subsection (6) states that a reference in this section to rights which have accrued is to be read in accordance with sections 67A(6) and (7) of the Pensions Act 1995. Section 67 of the Pensions Act 1995 applies whenever a power to modify an occupational pension scheme is exercised to make a change which would, or might, adversely affect a member’s subsisting rights. Sections 67A(6) and (7) specifically consider subsisting rights. Subsisting right means any entitlement to benefits, or right to future benefits, which a member has at that time under the scheme rules. Sections 67A(6) and (7) also outline the meaning of subsisting rights in respect of the survivor of a scheme member, and where the pensionable service of a member of an occupational pension scheme is continuing.
  7. Subsection (7) provides that under this section benefits that may be received under Chapter 3 of Part 2 and section 286 of the Pensions Act 2004 are to be disregarded. These are respectively benefits received under the Pension Protection Fund and the Financial Assistance Scheme.
  8. Subsection (8) outlines that for this section, parties to an act or deliberate failure to act include persons who knowingly assist in the act.
  9. Subsection (9) provides that where the Regulator is of the opinion that a person was party to a series of acts or failures to act, and the requirements of subsection (2) are met in relation to the series, the series of acts or failures to act is to be regarded as an act or failure in relation to which the requirements of subsection (2) are met.

Collecting information

Section 108: Duty to notify the Regulator of certain events

  1. This section amends section 69 of the Pensions Act 2004.
  2. Subsection (2) replaces the existing civil penalty under section 10 of the Pensions Act 1995 (civil penalties) with a new financial penalty under section 88A of the Pensions Act 2004 for failure to comply with the obligations imposed by section 69 of the Pensions Act 2004.
  3. Subsection (3) amends section 80 of the Pensions Act 2004 to provide that it is an offence for trustees or managers of an occupational pension scheme, the employer in relation to the scheme (or a prescribed person) to knowingly or recklessly give the Regulator false or misleading information about a notifiable event.

Section 109: Duty to give notices and statements to the Regulator in respect of certain events

  1. This section inserts a new section 69A into the Pensions Act 2004 which imposes a duty on employers and other prescribed persons to notify the Regulator about certain events relating to the sponsoring employer of a Defined Benefit occupational pension scheme.
  2. Subsection (1)(a) of the new section 69A requires an appropriate person unless the Regulator has directed otherwise, to provide a notice to the Regulator in circumstances to be prescribed by regulations.
  3. Subsection (1)(b) of new section 69A requires persons responsible for making a notice to report any material change to the intended event, or the effect of it, to the Regulator.
  4. Subsection (1)(c) requires that, unless the Regulator has directed otherwise, in cases where a notice has been provided, the appropriate person must notify the Regulator if the event is not going to take place or does not take place.
  5. Subsection (2) provides for "notifiable event" to be defined in regulations that will describe the nature of the events that may be required to be reported.
  6. Subsection (3) defines who is an appropriate person in relation to the requirement to notify the Regulator which includes the employer in relation to the scheme, a person connected with the employer and an associate of the employer, for example the parent of the employer. Subsection (3)(d) provides that this duty will also fall on other persons as prescribed in regulations.
  7. Subsection (4) provides for the new term "material change" to be defined in regulations that will describe the nature of changes to certain events relating to the sponsoring employer of a Defined Benefit occupational pension scheme that may be required to be reported.
  8. Subsections (5)(a) and (b) specify that the notice of the notifiable event and any notifiable change must be given as soon as reasonably practicable after the person making it has become aware of the event or a material change to it.
  9. Subsection (5)(c) requires that a notice about an event that is not going to, or did not, take place must be made as soon as reasonably practicable after the person required to send the notice becomes aware.
  10. Subsection (6) sets out that regulations may provide for an earlier notification of a notifiable event or a material change to a notifiable event.
  11. Subsection (7) specifies any notice of a notifiable event or a material change to a notifiable event must be accompanied by a statement.
  12. Subsection (8) provides a power to make regulations setting out what information is to be included in the accompanying statement.
  13. Subsection (9) illustrates the type of information that may be required in the statement made under the power at subsection (8). This includes how any detriment to the pension scheme resulting from the event is to be mitigated, and a description of any communication with the trustees or managers of the scheme about the event in question.
  14. Subsection (10) provides that where a person is required to send a notice and accompanying statement to the Regulator, the person must also give a copy of that notice and any accompanying statement to the trustees or managers of the eligible pension scheme.
  15. Subsection (11) specify that notices must be in writing and any accompanying statement must be in writing.
  16. Subsection (12) provides that anyone who makes a notification and statement under this section is protected in the event that making such a notice and statements would otherwise contravene any other duty imposed on that person. For example, a confidentiality section in an employment contract.
  17. Subsection (13) applies the new financial penalty at section 88A of the Pensions Act 2004 for failures to comply with the obligations imposed by this section.
  18. Subsection (14) defines connected persons for the purpose of those who may be required to provide a notice and accompanying statement to have the meaning given in section 249 of the Insolvency Act 1986. This subsection also defines associated persons for the purpose of those who may be required to provide a notice and accompanying statement to have the meaning given in section 435 of the Insolvency Act 1986 and section 229 of the Bankruptcy (Scotland) Act 2016.
  19. Subsection (15) of the new section 69A provides that an "eligible scheme" under this section has the same meaning as under section 126 of the Pensions Act 2004. That is an occupational pension scheme which is eligible to be taken over by the Board of the Pension Protection Fund. This subsection also provides that "event" under this section includes a failure to act.
  20. Subsection (3) of this section also amends section 80 of the Pensions Act 2004 to provide that it is an offence to knowingly or recklessly give the Regulator false or misleading information in a notice given under this section or the accompanying statement.

Gathering information

Section 110: Interviews

  1. This section inserts a new section 72A into the Pensions Act 2004.
  2. Subsections (1) and (2) of the section amend the Pensions Act 2004 by inserting a new section 72A after section 72.
72A Interviews
  1. Subsection (1) of the new section 72A introduces a new power enabling the Regulator to issue notices to require any person who would be in the scope of a notice under section 72(2) of the Pensions Act 2004 to attend an interview.
  2. Subsection (2) provides a regulation making power enabling the Secretary of State to specify the information to be contained in a notice issued under section 72A(1).
  3. Subsection (3) of section 110 repeals existing sections 72(1A) and (1B) of the Pensions Act 2004 which relate to a power to require persons to attend an interview with the Regulator concerning information provided in response to a section 72 notice in connection with the Regulator’s function relating to automatic enrolment and master trusts. This is because the new interview powers in new section 72A will apply to employer duties relating to these types of pension benefits.
  4. Subsection (4) of section 110 provides that not complying with the interview power under the new section 72A will be a criminal offence under section 77 of the Pensions Act 2004 in line with non-compliance with the Regulator’s existing section 72 powers.

Section 111: Inspection of premises

  1. This section amends section 73 of the Pensions Act 2004. It amends the range of premises that the Regulator can enter for the purposes of an inspection.
  2. For an inspection to take place the Regulator must be investigating compliance with listed legislative provisions. Subsection (2) of the section adds the Pension Schemes Act 2017 and part 1 of this Act to that list.
  3. Subsection (3) of this section inserts a further provision into section 73 of the Pensions Act 2004 that permits the Regulator to carry out inspections of premises liable to inspection at any reasonable time if it is investigating whether it has grounds to issue a contribution notice, restoration order or financial support direction. Subsection (2)(f) provides that this inspection power also applies to the corresponding provision in Northern Ireland legislation.
  4. Subsection (4) of this section inserts new subsections (5A) and (5B) into section 73 of the Pensions Act 2004 which creates a new power for inspectors to carry out inspections of premises liable to inspection for compliance with relevant legislative provisions. Subsection (5B) provides a regulation making power to enable the Secretary of State to specify the legislative provisions that the Regulator may enter premises to investigate compliance.
  5. Subsection (5) of this section amends the range of premises that an inspector may enter for the purposes of an inspection by adding those where documents are held which relate to the business of the sponsoring employer or, in the case of a scheme other than a money purchase scheme, certain significant corporate transactions the employer undertakes (rather than just documents relating to the administration of the pension scheme) are held.
  6. Subsection (6) inserts a new subsection (6A) into section 73 of the Pensions Act 2004 that the definition of ‘employer’ will be the definition which is relevant to the pension provision in question. It also inserts a new subsection (6B) to make it clear that the definition of ‘employer’ includes a previous employer in relation to the scheme.
  7. Subsection (7) of this section inserts a definition of "the pensions legislation" for the purpose of the new section 73(5B) of the Pensions Act 2004.

Section 112: Fixed penalty notices and escalating penalty notices

  1. This section inserts two new sections, 77A and 77B into the Pensions Act 2004 to allow the Regulator to issued fixed and escalating civil penalties for non-compliance with the interview and inspection powers inserted or extended by sections 110 and 111 and written notices for information issued under section 72 of the Pensions Act 2004.
77A: Fixed penalty notices
  1. New section 77A(1) details when a fixed penalty notice may be issued. New subsection (2) explains what is a fixed penalty notice and the effect of the notice. Subsection (3) provides a regulation making power to enable the Secretary of State to set the level of the penalty at a rate not exceeding £50,000 and subsection (4) details information which must be included in the fixed penalty notice.
  2. Section 77A(5) sets out the review and appeal rights where a recipient wishes to challenge the penalty by applying the existing provisions in sections 42, 43 and 44 of the Pensions Act 2008 relating to the recovery of the penalty and the recipient’s rights to ask for review of the penalty notice or appeal to a tribunal. Subsection (6) provides that this section does not apply in a case if a fixed penalty under section 40 of the Pensions Act 2008 (automatic enrolment) or section 17 of the Pension Schemes Act 2017 (master trusts) is applicable.
77B Escalating penalty notices
  1. New section 77B(1) details when an escalating penalty notice may be issued. New subsection (2) provides that where a person has exercised their right of referring the Regulator’s decision to issue a fixed penalty notice to a tribunal and the referral has not yet been determined, the Regulator may not issue an escalating penalty notice. New subsection (3) explains what an escalating penalty notice is and the effect of the notice, subsection (4) explains that an escalating penalty is a penalty calculated by reference to a prescribed daily rate and subsection (5) provides a regulation making power to enable the Secretary of State to set the level of the penalty at a rate not exceeding £10,000 a day. New subsection (6) details information which must be included in the escalating penalty notice.
  2. New section 77B(7) sets out the review and appeal rights where a recipient wishes to challenge the penalty by applying the existing provisions in sections 42, 43 and 44 of the Pensions Act 2008 relating to the recovery of the penalty and the recipient’s rights to ask for a review of the penalty notice or appeal to a tribunal. Subsection (8) makes it clear that this section does not apply in a case if an escalating penalty was issued under section 41 of the Pensions Act 2008 or section 18 of the Pension Schemes Act 2017.

Provision of false or misleading information

Section 113: Provision of false or misleading information to Regulator

  1. This section amends the Pensions Act 2004 with the insertion of new section 80A, which enables the Regulator to issue a financial penalty to a person for providing false or misleading information to the Regulator.
80A Financial penalty for providing false or misleading information to the Regulator
  1. Subsection (1) of newly inserted section 80A provides that a person may be issued with a financial penalty under section 88A of the Pensions Act 2004 if the Regulator is satisfied that a person has knowingly or recklessly provided the Regulator with information that is false or misleading in a material particular, and the information was provided in specified circumstances.
  2. Subsection (2) sets out the circumstances in which the Regulator can exercise the power to issue the new financial penalty. Subsection (2)(a) details the provisions under which the information was provided in purported compliance. Subsection (2)(b) of section 80A states that an additional condition is that the information is provided in applying for registration of a pension scheme under section 2 of the Welfare Reform and Pensions Act 1999 (registration of stakeholder pension schemes).
  3. Subsection (2)(c) details additional circumstances where information is provided otherwise than as mentioned in subsections 2(a) or 2(b), but in circumstances in which the person providing the information intends, or could reasonably be expected to know, that it would be used by the Regulator for the purpose of exercising its functions under the Pensions Act 1995, the Pensions Act 2004, the Pensions Act 2008, Schedule 18 to the Pensions Act 2014, the Pension Schemes Act 2017, or Part 1 of the Pension Schemes Act 2021.

Section 114: Provision of false or misleading information to trustees or managers

  1. This section amends the Pensions Act 2004 with the insertion of new section 80B, which enables the Regulator to issue a financial penalty to a person for providing false or misleading information to trustees or managers.
80B Financial penalty for providing false or misleading information to trustees or managers
  1. Subsection (1) of new section 80B states that this section applies to occupational pension schemes apart from those specified in subsections (1)(a) and (1)(b). Subsection (1)(a) states that the section does not apply to money purchase schemes. Subsection (1)(b) provides a regulation making power to enable the Secretary of State to specify other schemes that the section does not apply to.
  2. Subsection (2) provides that a person may be issued with a financial penalty under section 88A of the Pensions Act 2004 if the Regulator is satisfied that a person has knowingly or recklessly provided a trustee or manager of a non-money purchase scheme with information that is false or misleading in a material particular, and the information was provided in specified circumstances.
  3. Subsection (3) details the circumstances in which the Regulator can exercise the power to issue the new financial penalty. Subsection (3)(a) of inserted section 80B details the sections of the relevant legislation which the information should be provided in purported compliance with.
  4. Subsection (3)(b) of new section 80B provides that an additional condition is that the information is provided otherwise than as mentioned in subsection (3)(a) but in circumstances in which the person providing the information intends, or could reasonably be expected to know, that it would be used by the trustees or managers who receive it in that person’s capacity as a trustee or manager of the scheme.

Financial penalties

Section 115: Financial penalties

  1. This section amends the Pensions Act 2004 with the insertion of new section 88A, which introduces a new financial penalty, new section 88B, which outlines detail for the time for recovery of the financial penalty, and new section 88C, which details how the financial penalty is to be recovered.
88A Financial penalties
  1. Subsection (1) of newly inserted section 88A enables the Regulator to issue a notice requiring a person to pay a specified penalty amount, within a specified time-frame, in relation to an act that person has done.
  2. Subsection (2) states that the penalty is to be an amount determined by the Regulator, not exceeding a maximum of £1 million.
  3. Subsection (3) provides a regulation making power to enable the Secretary of State to increase the maximum amount that a civil penalty can be issued under section 88A to an amount above £1 million.
  4. Subsection (4) states that the minimum time-frame for compliance with the penalty notice is at least 28 days after the date on which the notice was issued.
  5. Subsection (5) of section 88A provides that the notice must specify the legislative provision by virtue of which the penalty is imposed.
  6. Subsection (6) details that this section applies in relation to a person where the Regulator determines that a penalty under this section may be imposed on a body corporate, and the act in question was done with the consent or willingness of a director, manager, secretary or other similar office of the body or a person purporting to act in any such capacity.
  7. Subsection (7) provides that where the affairs of a body corporate are managed by its members, the new financial penalty introduced by this section will apply in relation to the acts of a member in connection with the member’s functions of management, similar to a director of a body corporate.
  8. Subsection (8) stipulates that section 88A applies in relation to a person where the Regulator determines that a penalty under this section may, apart from this subsection, be imposed on a Scottish partnership, and the act in question was done with the consent or willingness of a partner.
  9. Subsection (9) provides that if the Regulator requires a person to pay a penalty under section 88A by virtue of subsection (6) or (8), the Regulator may not also require the body corporate or the Scottish partnership to pay a penalty in respect of the same act.
  10. Subsection (10) details that the Regulator may not issue a notice for the new financial penalty in relation to an act if the person has been convicted of an offence in respect of the same act, or if criminal proceedings for the offence have been instituted and have yet to be concluded against the person in respect of the same act.
  11. Subsection (11) states that the Regulator may not issue a notice under this section in respect of an act if the Regulator has required the person to pay a penalty under section 10 of the Pensions Act 1995 (civil penalties) in respect of the same act.
  12. Subsection (12) of inserted section 88A provides that in this section, any references to "act" includes any omissions to act.
88B Financial penalties: time for recovery
  1. Subsection (1) of new section 88B provides that subsection (3) applies where:
    1. the Regulator is satisfied that section 88A applies to a person by virtue of section 58C or 58D (financial penalty for avoidance of employer debt etc);
    2. the Regulator issues a notice under section 88A requiring a person to pay a penalty in respect of the act or failure to act in question; and
    3. when the notice is issued, the person is subject to one or more contribution notices issued under section 38 (contribution notices where avoidance of employer debt).
  2. Subsection (2) of section 88B states that subsection (3) does not apply if, when a notice under section 88A is issued, a qualifying insolvency event has occurred in relation to the person who is the employer in relation to the scheme and the penalty notice issued under section 88A relates to that employer.
  3. Subsection (3) details that the Regulator may not take any step to recover the penalty specified in a notice under section 88A, and may not treat an amount received as payment or part payment of the penalty, until after the relevant date, or if sooner, the date on which the qualifying insolvency event occurs in relation to the person who is the employer in relation to the scheme and the penalty notice issued under section 88A relates to that employer.
  4. Subsection (4) provides the meaning of "qualifying insolvency event" and "the relevant date".
88C Financial penalties: recovery
  1. Subsection (1) of new section 88C provides that a penalty under new section 88A is recoverable by the Regulator.
  2. Subsection (2) states that in England and Wales, the new financial penalty is, if the county court orders, recoverable under section 85 of the County Courts Act 1984.
  3. Subsection (3) states that in Scotland, the new financial penalty is enforceable as if it were an order issued by the sheriff court.
  4. Subsection (4) stipulates that the Regulator must pay any recovered penalties into the Consolidated Fund.

Supplementary

Section 116: Minor and consequential amendments

  1. This section gives effect to Schedule 7.

Schedule 7: The Pensions Regulator: minor and consequential amendments

  1. This Schedule makes minor and consequential amendments to other relevant legislation following from the changes to the Regulator’s powers.

Northern Ireland

Section 117: The Pensions Regulator: Northern Ireland

  1. This section introduces Schedule 8, which contains provision for Northern Ireland corresponding to provision made for England, Wales and Scotland in sections 103 to 115 and minor and consequential amendments.

Schedule 8: The Pensions Regulator: Northern Ireland

  1. This Schedule makes provision for Northern Ireland similar to that made by Part 3 and Schedule 7.

Part 1: Amendments of the Pensions (Northern Ireland) Order 2005

  1. Part 1 of the Schedule makes provision for Northern Ireland similar to that made by sections 103 to 115.
  2. Paragraph 2 (grounds for issuing an Article 34 contribution notice) corresponds to section 103. The power to make regulations contained in amendments made by this paragraph vests in the Department for Communities in Northern Ireland.
  3. Paragraph 3 (reasonableness of issuing contribution notice) corresponds to section 104.
  4. Paragraph 4 (determination of sum specified in a contribution notice) corresponds to section 105.
  5. Paragraph 5 (sanctions for failure to comply with a contribution notice) corresponds to section 106.
  6. Paragraph 6 (sanctions for avoidance of employer debt etc) corresponds to section 107. The power to make regulations contained in amendments made by this paragraph vests in the Department for Communities in Northern Ireland.
  7. Paragraph 7 (duty to notify the Regulator of certain events) corresponds to section 108.
  8. Paragraph 8 (duty to give notices and statements to the Regulator in respect of certain events) corresponds to section 109. The power to make regulations contained in amendments made by this paragraph vests in the Department for Communities in Northern Ireland.
  9. Paragraph 9 (interviews) corresponds to section 110. The power to make regulations contained in amendments made by this paragraph vests in the Department for Communities in Northern Ireland.
  10. Paragraph 10 (inspection of premises) corresponds to section 111. The power to make regulations contained in amendments made by this paragraph vests in the Department for Communities in Northern Ireland.
  11. Paragraph 11 (fixed penalty notices and escalating penalty notices) corresponds to section 112. The power to make regulations contained in amendments made by this paragraph vests in by the Department for Communities in Northern Ireland.
  12. Paragraph 12 (provision of false or misleading information to Regulator) corresponds to section 113.
  13. Paragraph 13 (provision of false or misleading information to trustees or managers) corresponds to section 114. The power to make regulations contained in amendments made by this paragraph vests in the Department for Communities in Northern Ireland.
  14. Paragraph 14 (financial penalties) corresponds to section 115. The power to make regulations contained in amendments made by this paragraph vests in the Department for Communities in Northern Ireland.

Part 2: Minor and Consequential Amendments

  1. Part 2 of the Schedule makes provision for Northern Ireland similar to that made by Schedule 7.
  2. Paragraph 15 corresponds to paragraph 1 of Schedule 7.
  3. Paragraph 17 corresponds to paragraph 3 of Schedule 7.
  4. Paragraph 18 corresponds to paragraph 4 of Schedule 7.
  5. Paragraph 19 corresponds to paragraph 5 of Schedule 7.
  6. Paragraph 20 corresponds to paragraph 6 of Schedule 7.
  7. Paragraph 21 corresponds to paragraph 7 of Schedule 7.
  8. Paragraph 22 corresponds to paragraph 8 of Schedule 7.
  9. Paragraph 23 corresponds to paragraph 9 of Schedule 7.
  10. Paragraph 24 corresponds to paragraph 10 of Schedule 7.
  11. Paragraph 25 corresponds to paragraph 11 of Schedule 7.
  12. Paragraph 26 corresponds to paragraph 12 of Schedule 7. This paragraph amends Article 288 of the Pensions (Northern Ireland) Order 2005 which governs Assembly control of subordinate legislation.
  13. Paragraph 28 corresponds to paragraph 14 of Schedule 7.
  14. Paragraph 30 corresponds to paragraph 16 of Schedule 7.
  15. Paragraph 31 corresponds to paragraph 17 of Schedule 7.

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