Pension schemes are run by ‘pension scheme trustees’. When people want to transfer their pension to another fund, trustees can find themselves in a conflicting role between respecting an individual’s right to move their money and ensuring the transfer is to a legitimate scheme. The Financial Conduct Authority (FCA) requires individuals keen on transferring money from their pension pot to have sought financial guidance (or actively refuse it) before the trustees are authorised to make the transfer. In addition to this, trustees must also verify that the receiving scheme meets the FCA’s regulatory standards.
Although these may seem like restrictions on the trustees’ ability to facilitate pension transfers, they are also tools that trustees can use to persuade an individual out of what they regard as a dubious scheme or investment.
In the government’s 2018 White Paper Protecting Defined Benefit Pension Schemes, it outlined plans for The Pension Regulator (TPR) to receive a boost to its anti-avoidance powers – its power to act against an employer whose actions compromise pensioners’ benefits. Specifically, the TPR will be empowered to:
- Disqualify company directors who have acted recklessly with pensioners’ funds, and is considering legislation to make such reckless behaviour a criminal offence.
- Directly impose criminal sanctions for the aforementioned cases as well as established criminal offences relating to pensions. In the past it could only pass on evidence of illegal behaviour to another public body to apply criminal sanctions. This aims to speed up the resolution of serious cases and minimise the losses incurred by victims of an ongoing pension fraud.
- De-authorise master trusts – these are pension schemes which multiple employers pay into – that it deems to fail minimum standards; new schemes must meet these same standards to apply for authorisation.
- Ask a broader range of inquiring questions of those it demands an interview with; and no-shows to interviews will face fines. Previously, interview absence could only be charged criminally, which was expensive and time consuming; this change gives TPR more flexibility and leverage over the non-compliant.
- Inspect records and electronic devices related to TPR regulations; previously inspections could only be carried out on records and devices related to scheme funding compliance, which was much more narrow.
- Require notification of more types of plans and events (e.g. mergers and other business decisions), and with a stricter timeframe for notification (previously there were circumstances in which TPR would only be informed after the plan was enacted).
This policy is ‘in progress’, and will be marked done when these powers are in place. The white paper itself confirms that “where legislation is required, this is unlikely to be before the 2019-20 parliamentary session at the earliest.” In the meantime we’ll keep tracking this, so follow this policy for updates.
- White Paper, Protecting Defined Benefit Pension Schemes
- Financial Guidance and Claims Act – Gov.uk
- Limiting Statutory Rights to Transfer – Gov.uk (see chapter 3)
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