Pension schemes have been fined a total of more than £30,000 by The Pensions Regulator (TPR) in its mission to ensure savers get value from their pensions.
Last year, TPR launched an initiative to check that savers in defined contribution (DC) schemes are benefitting from rules requiring trustees to assess whether they deliver value through a detailed value for members (dVFM) assessment.
So far, around 17% of DC schemes TPR engaged with as part of its drive on value reported that, having concluded their schemes do not offer good value, have opted to wind up. As dVFM regulations apply to around 1,323 DC schemes, if the results are reflected across the whole DC landscape, more than 200 schemes would be opting to wind up.
Mel Charles, Interim Executive Director of Regulatory Compliance at TPR, said: “These penalties show our determination to ensure DC schemes deliver value for savers.
“Those that can’t meet our expectations should consider whether a transfer to a better-value scheme and winding up is in members’ best interests.
“Trustees can expect to see more penalties issued as we analyse data from scheme returns.”
Published today, TPR’s compliance and enforcement bulletin, shows TPR used its powers 10 times in relation to dVFM assessments between January and June 2024. It issued seven penalties, totalling £19,250, and three improvement notices.
TPR has named schemes fined in relation to dVFM breaches on the penalty notices page of its website. More schemes are expected to be named as further penalties are issued or paid.
Combined with penalties issued between November 2023 and January 2024, when TPR carried out a pilot exercise, total penalties for dVFM breaches have reached £33,750.
Trustees of schemes failing to deliver value must have a plan to improve or transfer members to a better-value scheme.
Climate regulation breaches
TPR’s C&E bulletin also shows it fined two pension schemes for failures relating to annual climate change reports.
GKN Group Pension Scheme and The Prudential Staff Pension Scheme were fined £8,000 and £5,000 respectively.
Mr Charles added: “The vast majority of schemes are complying with their climate reporting requirements, but we will continue to enforce where we identify failures. We are also increasing our focus on investment governance and trustees should expect to be challenged on whether their climate reporting disclosures are the product of strategic decision making aimed at protecting savers from the financial risks of climate change, both now and in the future.”
Schemes in scope of the regulations, developed from the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations, must publish their report by a set deadline on a publicly available website so savers can be assured trustees are making decisions which take into account climate risks and opportunities.
Use of AE Powers remains consistent
The C&E bulletin also shows how many times TPR has used its wider powers to protect savers in the six months to June 2024.
The regulator’s use of its automatic enrolment (AE) powers has remained broadly consistent since the previous period, which covered July to December 2023.
TPR issued:
- 30,688 Compliance Notices compared to 29,489 in the previous period
- 18,589 Unpaid Contribution Notices compared to 17,451 in the previous period
- 20,677 Fixed Penalty Notices compared to 19,538 in the previous period
- 7,682 Escalating Penalty Notices (EPN) compared to 8,400 in the previous period
Catherine Nicholson, Interim Joint Director of Automatic Enrolment at TPR, said: “Millions of savers will depend on their workplace pension gained through AE for their retirement needs. To ensure they get the pension they are due, we first and foremost support employers to meet their AE duties, directly communicating with around 500,000 each year.
“However, for the minority who fail, we will, where necessary, use our powers to protect savers. Through the enforcement activity demonstrated in this bulletin and the support we provide, this period saw 97% of employers pay their workers’ contributions in on time.”
In respect of the use of TPR’s scheme regulation powers, the total number of statutory powers used was 229 compared to 191 in the previous six-month period. This increase is within expectations and consistent with broader patterns in recent years.
Notes to editors
- TPR launched its value drive in March 2023. Following pilot involving hybrid schemes, TPR issued penalties at the end of 2023, including one for £12,500 against a corporate trustee, reported in March. Further penalties, issued after June 2024, are expected through this ongoing initiative.
- TPR, the Financial Conduct Authority and the Department for Work and Pensions are working in partnership to develop a framework to improve the value schemes deliver for savers, by standardising the assessment process, enabling comparisons to be made across the DC landscape including contract and trust-based schemes. The FCA launched its consultation for contract-based schemes in August, ahead of the DWP introducing equivalent legislation for trust-based schemes.
- GKN Group Pension Scheme received a penalty notice for £8,000 for failure to publish a climate change report on a publicly available website, accessible free of charge within seven months of the scheme year ending on 5 April 2023. According to the chair of trustees, the report was not produced due to an error made in the assessment of the value of the scheme’s assets. The scheme said it had different investment advisers for its defined benefit and defined contribution (DC) sections, which led to assets in the DC section being overlooked. This was the first time the trustee had breached the regulations and training on the regulations has been undertaken. As the trustee was a corporate body and has a professional trustee director the penalty was set above the minimum. The schemes climate report was published in December 2023.
- The Prudential Staff Pension Scheme received a penalty notice for £5,000 for failing to publish a climate change report on a publicly available website, accessible free of charge within seven months of the scheme year ending on 5 April 2023. In November 2023, the scheme told TPR the report was published three days late. This was the first time the trustee had breached the relevant regulation, and the breach was promptly rectified when discovered. However, because the trustee is a corporate body the penalty was set at above the minimum. TPR also recommended the trustee put in place appropriate measures to prevent a similar breach in future.
- Last September, TPR said it had fined the ExxonMobil Pension Plan £5,000 for failing to meet climate change regulations.
The Pensions Regulator is the regulator of work-based pension schemes in the UK. Our statutory objectives are to:
- protect members’ benefits
- reduce the risk of calls on the Pension Protection Fund
- promote, and improve understanding of, the good administration of work-based pension schemes
- maximise employer compliance with automatic enrolment duties
- minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only)
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