Pensions Insight: 23 September to 7 October 2024

This insight provides an update on TPO and TPR news including the introduction of an Expedited Determinations process and the use of TPR powers in relation to DC value for members assessments and a material detriment contributions notice case.

TPO round-up

TPO publishes new factsheet on investigating complaints

The Pensions Ombudsman (TPO) has produced a factsheet for complainants detailing how it investigates complaints including its approach, the meaning of injustice, the process, communication, sharing and use of information, and confidentiality.

New expedited determination process being rolled out

TPO’s 25 September 2024 blog on expedited decision-making explains that, as part of its Operating Model Review, TPO is introducing a new accelerated Determinations process which is designed to speed up the complaints process, reduce waiting times and duplication with shorter Determinations in the style of summary court judgments. It involves a caseworker making an initial decision which, if not agreed by a party, can be referred to an Ombudsman for a Determination.

Initially, the process will be used for those complaints which are seen to have a ‘clear outcome’ such as incorrect benefit statements that have caused no loss. A successful pilot was carried out this summer and the new style of decision-making has been introduced as from the end of September.

TPO will also look at how industry insights from the Expedited Determinations can be disseminated given they will not be published.

TPR round-up

TPR fines DC arrangements for VfM breaches

The Pensions Regulator (TPR) has used its compliance and enforcement powers ten times between January and June 2024 for breaches of the more detailed annual value for members (VfM) assessment that specified defined contribution (DC) schemes have to complete. Of the ten uses, seven were penalties amounting to a total of £19,250 and three were improvement notices. This means that total penalties for detailed VfM breaches now amount to £33,750. TPR has cautioned that more penalties may be issued when TPR reviews scheme return data.

To date, approximately 17% of DC schemes that were involved in TPR’s pilot value initiative have decided to wind up because of poor value. Extrapolated across other relevant DC specified schemes (approximately 1,323) means more than 200 schemes would decide to wind up.

Action: DC schemes should ensure they are complying with their obligations in respect of VfM. Specified schemes are generally expected to wind-up or transfer out DC benefits where good value is not provided, and suitable improvement action cannot be or is not taken.

Meghraj scheme regulatory intervention report published

TPR has published a regulatory intervention report regarding its investigation into the defined benefit Meghraj Group Pension Scheme. The investigation resulted in the Upper Tribunal deciding in July 2023 to uphold TPR’s 2020 decision to issue a £1.875m contribution notice (CN) to Mr Anant Shah, the previous owner of the sponsoring employer of the scheme following a £3.6m payment being directed to a nominee company in Jersey which was related to Mr Shah and his nephew instead of to the scheme employer. (TPR had settled the case with the nephew prior to the Tribunal’s hearing.)

The report highlights the key parts of the Upper Tribunal’s decision. CNs are not ‘purely compensatory’ - the amount of a CN (subject to a section 75 debt cap) should be “what is reasonable” but is not limited to the scheme’s loss arising from the acts concerned or failure to act (at least in material detriment test cases). Although the financial situation of a target is an important factor in assessing reasonableness, it is not the sole factor – if a target does not fully disclose financial information, the Upper Tribunal can decide that ‘significant weight’ does not need to be placed on financial circumstances (in this case because the target had not provided suitable supporting evidence of his assertions).

The Upper Tribunal also confirmed that an “uplift to take account of the passage of time” since the acts/failure to act happened can be applied – in this case an uplift was applied because the target had caused significant harm to the scheme over a ‘considerable period of time’.

The scheme entered a Pension Protection Fund (the PPF) assessment period in October 2014 and the PPF as well as the scheme trustees are taking steps to obtain payment from Mr Shah.