Skip to main content

Your browser is out of date, and unable to use many of the features of this website

Please upgrade your browser.

Ignore

This website requires cookies. Your browser currently has cookies disabled.

Set your privacy preferences

We use necessary cookies to make our website work. Cookies are small files stored on your device. We also use optional cookies to improve our services and tell us if you have seen our advertising. The data we collect is anonymised. Are you happy to accept these cookies?

Overlapping powers: our approach

Important

We are not seeking comments on this section of the policy as it was part of the new enforcement policies consultation in late 2021.

  1. As set out in the enforcement options section, our powers can be grouped into the following categories:
    • regulatory powers
    • financial penalty powers
    • civil powers
    • criminal powers
  2. In certain circumstances, we may be able to use powers within two or more of these categories in a given case. This section explains our approach in those circumstances.
  3. This section does not cover:
    • our approach to selecting between available powers within a category (eg if more than one regulatory power is applicable to a particular situation)
    • our approach where a person carries out multiple acts, where one category of our powers is applicable to one act and a different category is applicable to another act
    • our approach where there is an overlap between our civil powers in the High Court and any of the above categories

What we mean by ‘overlap’

  1. By ‘overlap’, we mean that there may be situations where we reach the view that we have sufficient evidence and that it is appropriate to pursue powers within more than one category in relation to the same set of facts, such as a regulatory power and a financial penalty.
  2. When we refer to ‘overlapping powers’, we don’t mean that those powers necessarily have identical scope or that all the conditions for use of the relevant powers are the same.

General approach

  1. The general factors that we generally take into account when deciding on which category or categories of power to pursue in these situations are:
    • the seriousness of the conduct or behaviour (financial penalties and criminal proceedings are primarily directed towards punishment for more serious behaviour)
    • the duration of the conduct or behaviour
    • the impact of the behaviour (eg significant loss to the scheme, significant risk to the PPF, personal gain)
    • the outcome that the power can achieve (eg improving scheme funding to protect member benefits, facilitating or encouraging future compliance, seeking punishment or to deterring repetition of the behaviour)
    • a position of trust, the knowledge and/or proximity to the decision-making of the person concerned
    • the person’s cooperation with our engagement/investigation
    • the personal circumstances of the person concerned
    • any aggravating factors (such as previous breaches/non-compliance, concealment or dishonest behaviour, ignoring warnings from us or a professional adviser, reckless or deliberate wrongdoing)
    • any mitigating factors (such as prompt action to remedy the breach, whether any redress or mitigation has been provided and the timeliness of the redress or mitigation)
    • the interests of the generality of members of the scheme, the interests of other persons directly affected by the conduct or behaviour, and what is in the public interest
  2. Our assessment is not simply a calculation of the number of factors that are present on a given set of facts, as we also consider their weight, and the extent and degree to which any factor is engaged. We will usually prioritise the option that best protects member benefits by addressing the risk/harm to the scheme.
  3. We are guided by the outcomes we consider appropriate in all the circumstances, and our assessment of the general factors above also informs the order in which we take enforcement action. Where we decide to pursue more than one option, we usually prioritise the option that best addresses the risk/harm to the scheme.
  4. Generally, we won’t expect to pursue criminal proceedings and financial penalty proceedings against the same target for the same act(s) or conduct. Where we choose to pursue a financial penalty, we may later pursue criminal proceedings if the act(s) or conduct continues or fresh evidence comes to light which makes this appropriate.
  5. In the next section we look at the factors we take into account in cases involving particular categories of powers, followed by illustrative case examples on how we would expect to apply our approach in practice.

Approach in different types of cases

Breach of legislation a positive duty

  1. Our starting point is to consider whether the breach can be remedied. If so, generally we focus on using our regulatory powers. That starting point is subject to the general factors noted above, consideration of which may prompt us to pursue a financial penalty or a criminal prosecution as an alternative or in addition to our regulatory powers.
  2. Example one: a trustee fails to produce annual benefits statements for the first time. This is caused by underlying issues with record-keeping. We issue an improvement notice for the trustee to put an action plan in place to ensure the statements are properly issued in the future. The improvement notice includes steps that the trustee has volunteered to take, and is intended to ensure those steps are taken within a certain timeframe.
  3. Example two: a board of trustees has repeatedly failed to notify us of a change of the scheme’s registerable information, despite being told by their legal adviser to update us as soon as possible. Given the history of legislative breaches and the warnings given by the adviser, we seek a financial penalty against the trustees.
  4. Example three: an employer deducts employee contributions but fails to pass these to the relevant DC scheme. The sums have been spent by the employer’s directors in an unsuccessful attempt to keep the business solvent. As the use of regulatory powers cannot remedy this breach, and given the seriousness of the breach, we pursue prosecution of the directors and the employer.
  5. One exception to this general approach is the restriction on employer-related investments. Our starting point in these cases is to consider a financial penalty or prosecution as legislation imposes a strict liability for breach, meaning there is no requirement to prove an intention to breach the legislation.
  6. Example: a trustee has breached the prohibition on employer-related investments. Evidence shows it was the result of a genuine mistake and was unintentional and prompt action has since been taken to remedy the breach. We decide to pursue a financial penalty rather than criminal prosecution.
  7. For further information on our approach to employer-related investment breaches please see the employer related investments statement (PDF, 89kb, 6 pages), in particular the factors we take into account on page 5.

Breach of a prohibition, direction or restriction by TPR

  1. Our starting point in these cases is to consider a financial penalty or prosecution. The use of regulatory powers to impose further directions on a person who has breached an existing prohibition, direction or restriction is unlikely to result in a satisfactory outcome.
  2. Whether we pursue financial penalties or prosecution depends on the facts and merits of each case and consideration of the general factors set out above.
  3. Example: we make a prohibition order against an individual trustee. We learn that they have been appointed to multiple schemes three months later in breach of the notice. Given the short time since the imposition of the notice and the number of schemes affected, we pursue prosecution for the breach.

Anti-avoidance

  1. We have two regulatory anti-avoidance powers: the power to issue a CN and the power to issue a FSD. There is no other power that overlaps with our FSD power, so this section is only concerned with our CN power.
  2. To protect the security of scheme members, our primary objective when considering avoidance behaviour is to obtain funds for the scheme and/or protection of the PPF. It is therefore likely that we will prioritise regulatory proceedings seeking a CN. However, there may also be grounds to pursue criminal proceedings or a financial penalty in parallel or sequentially, or as an alternative to regulatory action for a CN. This might be the case, for example, where we identify evidence of serious intentional or reckless conduct that has caused harm to the scheme.
  3. Our approach to the investigation and prosecution of the criminal offences of avoidance of employer debt and conduct risking accrued scheme benefits is set out in our criminal offences policy.
  4. Where the conduct is serious but not so serious as to justify prosecution, we may consider issuing a financial penalty for avoidance of employer debt or conduct risking accrued scheme benefits under s58C and D of the Pensions Act 2004 for which the Determinations Panel can impose a fine of up to £1 million. The seriousness of the behaviour and its impact on the scheme, as well as any aggravating or mitigating features, determines the amount sought, as set out in the high fines policies.
  5. We may pursue a criminal prosecution without pursuing a CN. For example, we may choose not to pursue a CN against a potential target if there is no prospect of any meaningful recovery, and we are not able to impose a CN if a person was not associated or connected to the scheme employer at the relevant time. However, in either case, prosecution would be reserved for only the most serious types of behaviour.

Non-compliance with information-gathering powers

  1. Our starting point is to consider the nature and duration of the breach, the behaviour and conduct involved, and the impact on our investigation. For example, for a failure to provide information in response to a notice by the stated deadline which resulted from an oversight rather than a deliberate act, a fixed penalty notice may be appropriate, and in the event of further neglect, an escalating penalty notice. By contrast, if the person failed to comply in order to conceal information that would help our investigation, we would not consider this to be a reasonable excuse and could look to prosecute. In relation to willful non-compliance intended to impede our investigation, we almost always pursue a criminal prosecution.
Back to top