The Regulator has grown teeth and DB and DC trustees alike would do well to take notice, argues Anne-Marie Winton, Partner at ARC Pensions Law.

It’s Monday morning, and you get a letter postmarked “Brighton”, sent by Special Delivery. It’s not your birthday, so you are not sure what to expect.

So you rip open the envelope and find that The Pensions Regulator (“TPR”) has given you notice under section 72 of the Pensions Act 2004 to send it a bundle of documents by a week on Wednesday.

wrath-of-the-regulator

For most people this would cause a sharp intake of breath and immediate investigation into what has been requested in order to meet the short deadline.

But it appears that not everyone has that instinct – which is particularly strange given that the letter will have also included a prominent warning that: “You may be committing a criminal offence in the documents and/or information requested are not supplied or it the information supplied is false or misleading”.

What happened?

At the end of April, TPR announced that it would prosecute Samuel Smith Old Brewery (Tadcaster) and its chairman for failing to comply with one of these section 72 notices.

TPR had asked for information about the company’s finances in connection with a funding investigation, and it is highly likely to have been in previous correspondence to seek that information voluntarily. However, for some reason the company had chosen not to properly engage with TPR’s requests.

This means that the recipients of the statutory request now face a fine of up to £5000 and the associated reputational damage of joining Dominic Chappell on the list of those who have appeared before the Magistrates’ Court to try to defend their failure to co-operate with TPR’s information gathering powers.

What does it mean for trustees?

TPR’s section 72 power allows it to request production of any document or other information described in the notice and relevant to the exercise of its powers; TPR can also order you to attend a meeting to explain the documents provided.

But this is not carte blanche for a fishing exercise. TPR has to specify what it wants to see – though that request could be very wide, e.g. all minutes relating to a particular discussion or decision, or copies of all correspondence between the employer and the trustees about a valuation.

Use of a shredder in response to a section 72 notice is not an option”

The recipient of the request could be the trustees, the scheme employer, their professional advisers or anyone else TPR thinks may hold relevant information.

Use of a shredder in response to a section 72 notice is not an option; if you are found to have concealed or destroyed a requested document, without reasonable excuse, the fines are unlimited and could be accompanied by up to two years in prison.

What next?

To date, TPR has mostly used these section 72 powers in connection with pensions liberation and moral hazard cases, but data published for the start of the financial year 2017/18 has also added mastertrusts, scheme returns and charging to the list of cases.

So TPR is clearly flexing its muscles and showing that it is prepared to use these powers in wider circumstances.