Consultation outcome

Strengthening The Pensions Regulator’s Powers: Contribution Notice and Information Gathering Powers Regulations 2021

Updated 29 June 2021

This was published under the 2019 to 2022 Johnson Conservative government

Introduction

This Consultation seeks views on the proposed drafting of 2 sets of regulations concerning the powers of The Pensions Regulator following changes introduced by the Pension Schemes Act 2021. The 2 sets of draft regulations are ‘The Pensions Regulator (Contribution Notices) (Amendment) Regulations 2021’ which outline the ‘employer resources test’ and ‘The Pensions Regulator (Information Gathering Powers and Miscellaneous Amendments) Regulations 2021’.

Section 103 of the Pension Schemes Act 2021 amends section 38 of the Pensions Act 2004, and inserts a new section 38E which introduces the ‘employer resources test’. This will provide an alternative test, which will work alongside the existing regime, to assess whether an act or failure to act has occurred for determining whether a section 38 Contribution Notice can be issued.

New section 38E includes regulation making powers to prescribe how the resources of a sponsoring employer are to be determined. Specifically:

(a) what constitutes the resources of an employer; and

(b) how the value of resources of the employer is to be determined, calculated and verified for the purposes of the ‘employer resources test’

The draft ‘The Pensions Regulator (Information Gathering Powers and Miscellaneous Amendments) Regulations 2021’ prescribe:

(a) information that interview notices should contain;

(b) modifies how inspection powers may be utilised in multi-employer schemes; and

(c) sets out the fixed or escalating penalty rates for non-compliance with information gathering requests.

About this consultation

Who this consultation is aimed at

• Pension Industry bodies and professionals
• Employers and representative organisations
• Trustees and scheme managers
• Pension Scheme members and beneficiaries
• Any other interested parties

Purpose of the consultation

Chapter 1 of this document is focused on the draft The Pensions Regulator (Contribution Notices) (Amendment) Regulations 2021. It outlines the rationale and suggested approach for the ‘employer resources test’, comprising of:

(a) what constitutes the resources of the employer; and

(b) a suggested process whereby the value of ‘employer resources’ may be determined, calculated and verified for the purposes of the ‘employer resources test’

Chapter 2 of this document outlines the draft The Pensions Regulator (Information Gathering Powers and Miscellaneous Amendments) Regulations 2021. These comprise of:

(a) information that interview notices should contain;

(b) modifies how inspection powers may be utilised in multi-employer schemes; and

(c) sets out the fixed or escalating penalty rates for non-compliance with information gathering requests.

The purpose of this consultation is to draw interested parties’ attention to the proposed draft regulations on The Pensions Regulator (Contribution Notices) (Amendment) Regulations 2021 which outline the ‘employer resources test’ and The Pensions Regulator (Information Gathering Powers and Miscellaneous Amendments) Regulations 2021. We welcome views on any impacts, including any unintended consequences that the draft regulations might have on specific groups. These regulations are expected to come into force in October 2021.

Scope of consultation

This consultation applies to Great Britain.

Occupational pensions policy is a reserved matter for Great Britain and is a devolved matter for Northern Ireland. It is anticipated that Northern Ireland will make corresponding regulations.

Duration of the consultation

The consultation period begins on 18 March 2021 and runs until 29 April 2021. This represents an appropriate timespan due to the targeted and technical nature of the issues being asked about. Please ensure your response reaches us by that date as any replies received after that date may not be taken into account.

How to respond to this consultation

Please send your consultation responses to: [email protected].

As we are currently in lockdown, dealing with hard copies of responses is more difficult than normal as most of our staff are working from home. Where possible, please send responses to the email address above.

If you are unable to email and prefer to send your response by post, please address it to:

Defined Benefit: The Pensions Regulator Powers team
DWP Consultation Coordinator
4th Floor
Caxton House
Tothill Street
London
SW1H 9NA

Government response

We will aim to publish the government response to the consultation here on the GOV.UK website within 12 weeks.

How we consult

Consultation principles

This consultation is being conducted in line with the revised Cabinet Office consultation principles published in March 2018. These principles give clear guidance to government departments on conducting consultations.

Feedback on the consultation process

We value your feedback on how well we consult. If you have any comments about the consultation process (as opposed to comments about the issues which are the subject of the consultation), including if you feel that the consultation does not adhere to the values expressed in the consultation principles or that the process could be improved, please address them to:

DWP Consultation Coordinator
Legislative Strategy Team
4th Floor, Caxton House
Tothill Street
London
SW1H 9NA

Email: [email protected].

Data Protection and Confidentiality

For more information about what we do with personal data, you can read DWP’s Personal Information Charter. The information you send us may need to be passed to colleagues within the Department for Work and Pensions, published in a summary of responses received and referred to in the published consultation report.

All information contained in your response, including personal information, may be subject to publication or disclosure if requested under the Freedom of Information Act 2000. By providing personal information for the purposes of the public consultation exercise, it is understood that you consent to its disclosure and publication. If this is not the case, you should limit any personal information provided, or remove it completely. If you want the information in your response to the consultation to be kept confidential, you should explain why as part of your response, although we cannot guarantee to do this.

To find out more about the general principles of Freedom of Information and how it is applied within the Department for Work and Pensions (DWP), please contact the Central Freedom of Information Team: Email: [email protected].

The Central FoI team cannot advise on specific consultation exercises, only on Freedom of Information issues. Read more information about the Freedom of Information Act.

Chapter 1: The Employer Resources Test

Background

The Pensions Regulator may issue a Contribution Notice to a person if the conditions in section 38(3) of the Pensions Act 2004 are satisfied. Those conditions include where The Pensions Regulator is of the opinion that the person was a party to an act or a deliberate failure to act that falls within one of the legislative descriptions. A Contribution Notice is a notice issued by The Pensions Regulator which imposes an obligation on the recipient to pay a specified sum of money to a Defined Benefit scheme.

Section 103 of the Pension Schemes Act 2021 amends section 38 of the Pensions Act 2004 to include 2 new tests that will provide alternative tests, which will work alongside the existing regime, to assess whether an act or failure to act has occurred for determining whether a section 38 Contribution Notice can be issued. These new alternative tests are called – the “employer insolvency test” and the “employer resources test”. Corresponding statutory defences for these tests have also been introduced.

Subsection (4) of section 103 inserts new sections 38E and 38F into the Pensions Act 2004 and sets out the “employer resources test” and the corresponding defence.

The “employer resources test” is met where The Pensions Regulator is of the opinion that:

• the act or failure to act reduced the value of the resources of the employer
• that reduction was a material reduction relative to the estimated section 75 debt in relation to the scheme

The “employer resources test” includes 2 regulation making powers to prescribe (a) what constitutes the resources of the employer, and (b) how the value of employer’s resources is to be determined, calculated and verified. This chapter discusses the rationale for and a suggested approach for (a) and (b).

These regulations will work alongside The Pensions Regulator’s code of practice and any other related guidance so that industry are informed on how the “employer resources test” will be applied.

The current regime

The primary legislative framework for the Contribution Notice regime is set out in sections 38 to 41 of the Pensions Act 2004. This regime is intended to enable The Pensions Regulator to require a person who is the sponsoring employer of an occupational pension scheme, or a person who is connected or associated with the sponsoring employer, and who has been a party to an act or failure to act where one of the main purposes was to avoid the employer’s section 75 debt to the scheme (actual or contingent), to pay money to the pension scheme.

The amount payable under a Contribution Notice is a figure up to the maximum amount of the debt that would be imposed on the sponsoring employer if section 75 were to be triggered and calculated on the date of the act or failure to act. In order to impose liability on any person to pay the sum specified in a Contribution Notice, The Pensions Regulator must be of the opinion that it is reasonable to impose such liability on that person.

Since the amendments made under the Pensions Act 2008, The Pensions Regulator has had the additional ground to issue a Contribution Notice where the “material detriment test” is met. In order to issue a Contribution Notice, by reference to “the material detriment test”, The Pensions Regulator must be of the opinion that the act, or failure to act, has affected in a material way the likelihood of the accrued scheme benefits being received.

In its response to the consultation on Protecting Defined Benefit Pension Schemes, the government proposed increasing the flexibility available to The Pensions Regulator, aligning the overall policy intent with their approach of being clearer, quicker and tougher.

To achieve this, the Pension Schemes Act 2021 introduced 2 additional tests to the Contribution Notice regime – the “employer insolvency test” and the “employer resources test” and their respective statutory defences. These 2 new tests would be considered alongside the existing regime where The Pensions Regulator would consider whether an act or failure to act has occurred for determining whether a section 38 Contribution Notice can be issued.

The need for the 2 new tests within the existing Contribution Notice regime

The tests in the existing Contribution Notice regime – the “main purpose” and “material detriment tests”, are scheme focused, whereby an assessment is made on the impact of the act or failure to act on the scheme. In a majority of The Pensions Regulator’s past Contribution Notice cases, the act or failure to act on which the action is based is something which affects the employer, as opposed to something which damages the scheme directly.

As a result, The Pensions Regulator is required, in practice, to extrapolate from an employer related act, the impact on the scheme which is evidentially challenging. It was the policy intention therefore to introduce a jurisdictional test in the Contribution Notice regime which is assessed by reference to the impact on the sponsoring employer.

An additional issue faced by The Pensions Regulator is the difficulty in forecasting the medium and long-term performance of a business for the purposes of the existing ‘material detriment test’. The “employer resources test” introduced in the Pension Schemes Act 2021 is therefore designed to assess this on a snapshot basis, removing the need to forecast how the employer might or might not have performed in the future absent the act or failure to act.

Options

A number of options were considered whereby resources of the employer could be assessed and these include:

1. Net Assets (as set out in accounts). However, the book value of assets may differ significantly from actual market value, no value is placed on cash-generating abilities of an employer and a straightforward, unadjusted approach would not allow for the relative security of competing creditors.

2. Covenant value, for example calculating the net present value of future cash flows, or via Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) ^{[footnote 1]} multiples. However, this involves a large degree of subjectivity as to the correct EBITDA, or multiple, or discount rate and consequently does not offer visibility to the market as to whether their actions would meet the jurisdictional test.

3. Covenant strength, where a holistic assessment of strength would be assessed, as opposed to a mechanistic approach to calculate value. The issue with this approach is that covenant assessment is often subjective, and would similarly not offer visibility to the market.

4. The final option considered is to use profitability which is a term widely understood by all involved; is less subjective than other options and would be something akin to the employer’s ability to support the scheme which is examined as part of assessing employer covenant.

The profitability measure is not perfect however, and neither are the alternatives that have been considered.

This would not be a simple test and there remain subjectivities in this approach which could lead to complexities in future Contribution Notice cases and uncertainty for the market as to whether future actions would be caught by the ‘employer resources test’. However, upon consideration, no alternatives which are simpler in application, nor any less subjective, were identified.

Assessing resources of the employer through the lens of normalised profitability whereby non-recurring or exceptional items are removed is something that industry would be familiar with, and this approach would allow for the test to have a higher degree of specificity and should minimise uncertainty. This meets the policy intent of allowing The Pensions Regulator to take swifter action and to be more efficient. It is also the policy intent that these regulations work alongside The Pensions Regulator’s code of practice and any related guidance providing further granularity.

It is important to note that meeting the ‘employer resources test’ will not automatically mean that a Contribution Notice will or should be issued. The Pensions Regulator must show that it is reasonable to impose a Contribution Notice on a person. Even if an employer’s profitability has reduced as a result of an act or failure to act, that employer might continue to have substantial strength (for example due to its assets, which would not be taken into account in a profitability assessment) so that it is able to support the scheme.

These types of circumstances are likely to be taken into account by The Pensions Regulator when considering whether imposing a Contribution Notice would be reasonable.

Proposed approach

The proposed approach is therefore that ‘resources of the employer’ be determined as normalised profits of the employer before tax.

It is proposed that the value of the resources of the employer is to be determined, calculated and verified using the following process:

Stage 1: Calculate normalised annual employer profit before tax absent the “act”

Where available,^{[footnote 2] [footnote 3] [footnote 4]} the latest annual accounts ^{[footnote 5]} of the employer will be taken prior to the “act” or “failure to act” (or the latest annual accounts prior to the first act/failure in the series). These accounts would ordinarily cover a 12-month period (the “Accounting Reference Period”).

This accounting information will then be used to calculate normalised annual profit before tax (NAPBT) of the employer, which would exclude any exceptional or non-recurring items. The Pensions Regulator will be able to determine what items are exceptional or recurring, including their value. This would be a £ amount for the year, representing the NAPBT of the employer, absent any impact of the “act” or “failure to act” (“the Pre-act NAPBT”).

Stage 2: Calculate the change to the NAPBT attributable to the “act”

The impact on the employer’s NAPBT caused by the “act” or “failure to act” will then be identified and established using the same time period as used in stage 1. An adjustment is then applied that represents this impact to the Pre-act NAPBT (the result being the “Adjusted NAPBT”). The Pensions Regulator will be able to determine the monetary value of the impact on the Pre-act NABPT. It is anticipated that the impact may be determined from various sources, such as subsequent annual accounts or management accounting information.

Stage 3: Compare the difference between the Pre-act NAPBT and the Adjusted NAPBT to the scheme’s s75 deficit ^{[footnote 6]}

The Pensions Regulator would put forward an argument on materiality particular to the facts of the case, as is currently done with the material detriment test.

Impact Assessment

An impact assessment is not necessary for these regulations. The impact assessment for the Pension Schemes Act 2021 assessed the additional costs to business of familiarisation with the new regime. This regulation provides details of what constitutes employer resources and how they will be determined, calculated and verified and does not add any further costs to business.

Questions

1. Do the draft regulations achieve the stated policy aim?

2. Can you see anything that means that these draft regulations will not work?

3. Do you foresee any unintended consequences in this approach, if so please provide details?

4. If the approach is not workable, please provide your views on what would be an appropriate alternative approach?

Chapter 2: The Pensions Regulator (Information Gathering Powers and Miscellaneous Amendments) Regulations 2021

Background

The Pensions Regulator has a range of powers to help it obtain the information it needs to enable it to carry out its functions. These powers were introduced in the Pensions Act 2004 and extended for Automatic Enrolment in the Pensions Act 2008 and for Master Trusts in the Pension Schemes Act 2017.

Sections 110 to112 of the Pension Schemes Act 2021 extend The Pensions Regulator’s information gathering powers under sections 72 to 78 of the Pensions Act 2004 to make them more consistent across all its functions and all types of pension schemes.

Provisions enable The Pensions Regulator to require someone to attend an interview, extend the purposes why an inspector may enter premises and introduces new fixed or escalating penalties which may be imposed for non-compliance with information gathering requirements. In each case the primary legislation requires that some of the detail is prescribed in regulations. This detail is included in the draft ‘The Pensions Regulator (Information Gathering Powers and Miscellaneous Amendments) Regulations 2021’ which are being consulted on here.

We anticipate that the additional information gathering powers will come into force on 1 October 2021. The powers will enable The Pensions Regulator to ask for any relevant information or documents from any time in the past during an interview or inspection. However, how it uses the material obtained will be subject to the admissibility of evidence provisions and, where relevant, the date that legislative provisions or offences came into force.

Interviews

Section 110 of the Pension Schemes Act 2021 inserts a new section 72A in the Pensions Act 2004. This will allow The Pensions Regulator to conduct interviews with anyone within the scope of existing section 72(2) of the Pensions Act 2004 who might have information or be asked to provide an explanation relevant to the exercise of its functions. It will replace The Pensions Regulator’s previous power under section 72(1A) to interview a person in respect of information provided in response to a section 72 notice in respect of Automatic Enrolment or Master Trust matters.

The primary legislation requires that The Pensions Regulator issues a written notice calling the person for an interview and that information which must be in the notice will be prescribed in regulations.

The proposed provisions

Part 2 of the draft regulations covers the interview notice. Regulation 3(1) lists the minimum amount of information which must be included in the notice. The intention is that the information set out in the notice will be sufficient for the interviewee to be clear as to when and where the interview will take place, why The Pensions Regulator wishes to conduct the interview, the interviewee’s rights and responsibilities, and how the information obtained can be used. It will also list the potential consequences for the interviewee by way of sanction in the event of non-compliance.

The restrictions over the last year necessitated by COVID-19 have introduced new ways of working throughout the country. One of these is the increased use of virtual or on-line meetings, interviews, court hearings etc. This type of meeting can have advantages over face-to-face meetings and it is likely that their use will continue to a certain extent, even when restrictions have eased.

Regulation 3(2) therefore provides that if the interview is proposed to be conducted via an on-line communication platform, the notice must provide additional information as to how the on-line communication platform should be accessed.

Detailing the information required in the notice through regulations is intended to reassure potential interviewees that they will receive relevant information prior to the interview being conducted. We would like to know if respondents agree that the items listed in the draft regulations cover the necessary points or whether there is other information they believe should be included.

Impact Assessment

An impact assessment is not necessary for these regulations. The impact assessment for the Pension Schemes Act 2021 assessed the additional costs to business of the extended interview powers. This regulation provides details of what will be in a notice and does not add any further costs to business.

Questions

5) Do you agree that the requirements in draft regulation 3(1) cover all the essential information that the interviewee should be made aware of? If not, please indicate which additional items of information you consider should be included.

Inspections

Section 111(5) of the Pension Schemes Act 2021 extends the range of premises that an inspector may enter under section 73(6) of the Pensions Act 2004 (new section 73(6)(d) to (f). This includes premises:

• where documents relating to the business of the employer in relation to the scheme are being kept;

• where the administration of the business of the employer in relation to the scheme is carried out; and

• in the case of non-money-purchase schemes, where documents relevant to a change in the ownership of the employer or a significant asset of the owner are being kept.

New section 73(6B) makes it clear that a reference to an employer also refers to previous employers in relation to the scheme. However, the primary legislation does not specifically reference schemes with more than one employer. This is because the Pensions Act 2004 already contains a power under section 307(1) to modify provisions in the Act with reference to multi-employer schemes.

The proposed provisions

The proposed modifications to section 73(6)(d) to (f) made under the power in section 307(1) are at Part 3 of the draft regulations.

Regulation 4 covers non-sectionalised multi-employer schemes. It modifies the primary legislation so that the term ‘employer’ applies to any employer in relation to the scheme.

Regulation 5 covers sectionalised multi-employer schemes. It modifies the primary legislation so that the term ‘employer’ applies to any employer in relation to that section of the scheme.

Impact assessment

An impact assessment is not necessary for this regulation. The impact assessment for the Pension Schemes Act 2021 assessed the additional costs to business of the extended inspection powers, and included employers which are employers in relation to a multi-employer scheme.

Questions

6) Do you think that the draft regulations ensure that The Pensions Regulator has the same inspection powers under section 73(6)(d) to (f) regarding any employer of a multi-employer scheme as it has where there is only a single employer?

Penalties

Failure to comply with information-gathering powers exercised by The Pensions Regulator under sections 72 to 76 of the Pensions Act 2004 has been a criminal offence since the provisions came into force. However, the 2008 Act introduced civil fixed and escalating penalties for non-compliance with a range of Automatic Enrolment requirements, including failing to provide information under section 72 of the Pensions Act 2004. The Pension Schemes Act 2017 also introduced fixed and escalating penalties for not complying with section 72 notices in respect of Master Trusts.

The Pensions Regulator found having a power to issue civil penalties as an alternative to criminal proceedings helpful in promoting compliance and obtaining information. New sections 77A and 77B of the Pensions Act 2004, inserted by section 112 of the Pension Schemes Act 2021, will allow The Pensions Regulator to issue fixed and escalating penalties for non-compliance with other information gathering provisions as an alternative to a criminal prosecution.

A fixed penalty under new section 77A will apply where a person:

(a) has failed to comply with a notice under section 72 or 72A

(b) has failed to comply with a requirement under section 75

(c) has prevented or hindered an inspector exercising any power under section 73, 74 or 75

The fixed penalty under section 77A will not apply if The Pensions Regulator is able to impose a fixed penalty under section 40 of the Pensions Act 2008 (Automatic Enrolment) or section 17 of the Pension Schemes Act 2017 (Master Trusts).

If a person has received a fixed penalty under section 77A but the failure to comply with a notice under sections 72 or 72A continues, The Pensions Regulator may issue an escalating penalty under new section 77B. The escalating penalty under section 77B will not apply if The Pensions Regulator is able to impose an escalating penalty under section 41 of the Pensions Act 2008 (Automatic Enrolment) or section 18 of the Pension Schemes Act 2017 (Master Trusts).

Neither can an escalating penalty be issued if the person has an outstanding appeal to the Tribunal against the fixed penalty.

The primary powers at subsection 3 of section 77A and subsection 5 of section 77B, require that the level of the fixed and escalating penalties are set out in regulations.

Although The Pensions Regulator’s information gathering powers were not part of the formal consultation on The Pensions Regulator’s powers undertaken in summer 2018, informal roundtable discussions took place with interested parties. The general consensus was that penalties of a similar level to those available regarding Automatic Enrolment were appropriate for the fixed penalty and for escalating penalties to individuals.

However, regarding escalating penalties for non-individuals, the only consensus was that different levels of penalty dependant on the number of employees in the company, as with Automatic Enrolment, was not appropriate.

Proposed provisions

The provisions regarding penalties are at Part 4 of the draft regulations.

Regulation 6(1) provides that the level of the fixed penalty under new section 77A will be £400. This is the same level as the fixed penalty for not complying with The Pensions Regulator’s information requests in respect of Automatic Enrolment ^{[footnote 7]}. The government felt this was a more appropriate comparison than the higher penalty which can be imposed in the case of Master Trusts.

Regulation 6(2)(a) provides the level of the escalating penalty shall be £200 for each day that the non-compliance continues where the person is an individual. This is again the same rate as the penalty in Automatic Enrolment for an individual who is not an employer.

The government believes that a higher level of escalating penalty should apply to those entities which are not individuals. Regulation 6(2)(b) therefore provides for a higher level of escalating penalty to apply in these cases.

The government does not believe there is a simple and practical solution to categorising these entities by size. If fixed by reference to the pension scheme which is the focus of The Pensions Regulator investigations, a small pension scheme may have few members, but have a large sponsoring employer with many employees (who are not members of the scheme) and vast assets.

Conversely a large scheme may have many members but a struggling employer with a small workforce. Alternatively, the requirements may not be directed to either the scheme or the employer at all. Those other bodies may be entirely separate entities to either a scheme or an employer, with varying levels of members, employees, officers and differing financial standing.

Accordingly, it is considered that reference to scheme size, number of members or employees is not the appropriate measure.

Therefore, we propose a single, escalating scale of penalties in the format which already exists for Master Trusts, which will apply in all cases other than an individual.The rate for the first day on which the escalating penalty will apply will be £500, and will increase cumulatively on each subsequent day by that amount until, after 20 days, the daily rate is £10,000.

The government accepts that this will be a significant penalty for many that are not individuals. However, to have reached the stage where an escalating penalty is applicable means that the non-compliance has continued for some time. The aim of The Pensions Regulator’s information gathering powers is to ensure it can collect the information needed to enforce pensions legislation and protect members’ benefits. A delay in its investigation can mean members’ benefits are at greater risk.

The Pensions Regulator will reflect these changes in their updated Monetary Penalties Policy ^{[footnote 8]} which will be published in due course.

Impact Assessment

An impact assessment is not necessary for these regulations. The impact assessment for the Pension Schemes Act 2021 assessed the additional costs to business of familiarisation with the new regime. These draft regulations only set the level of the penalties and the cost of the penalties themselves is not assessed as business costs.

Questions

7) Do you agree that £400 is an appropriate level for a fixed rate penalty under new section 77A of the Pensions Act 2004?

8) Do you agree it is appropriate that the fixed penalty under section 77A is aligned with the fixed penalty under section 40(1)(d) of the Pensions Act 2008 for failure to comply with similar information gathering requirements in connection with Automatic Enrolment?

9) If not, please state the level you think would be appropriate and why.

10) Do you agree that £200 is an appropriate level for an escalating penalty to be imposed on an individual under section 77B?

11) Do you agree it is appropriate that the escalating penalty for an individual under section 77B is aligned with the escalating penalty under section 41(1)(d) of the Pensions Act 2008 for failure to comply with similar information gathering requirements in connection with Automatic Enrolment?

12) If not, please state the level you think would be appropriate and why.

13) Do you agree that the escalating penalty regime proposed is appropriate for persons who are not individuals who continue to fail to comply with The Pensions Regulator’s requests for information? If not, please indicate the level of penalty you think is appropriate and why. If you think a different approach for non-individuals is more appropriate, please give details along with your reasons.

Conclusion and Questions

This consultation seeks views on the proposed drafting of the regulations for The Pensions Regulator (Contribution Notices) (Amendment) Regulations 2021 which outline the ‘employer resources test’, and ’The Pensions Regulator (Information Gathering Powers and Miscellaneous Amendments) Regulations 2021’. It is a targeted consultation and we welcome your comments and suggestions on the questions raised below:

The Employer Resources Test

1) Do the draft regulations achieve the stated policy aim?

2) Can you see anything that means that these draf regulations will not work?

3) Do you foresee any unintended consequences in this approach, if so please provide details?

4) If the approach is not workable, please provide your views on what would be an appropriate alternative approach?

The Pensions Regulator (Information Gathering Powers and Miscellaneous Amendments) Regulations 2021

5) Do you agree that the requirements in draft regulation 3 (1) cover all the essential information that the interviewee should be made aware of? If not, please indicate which additional items of information you consider should be included.

6) Do you think that the draft regulations ensure that The Pensions Regulator has the same inspection powers under section 73(6)(d) to (f) regarding any employer of a multi-employer scheme as it has where there is only a single employer?

7) Do you agree that £400 is an appropriate level for a fixed rate penalty under new section 77A of the Pensions Act 2004?

8) Do you agree it appropriate that the fixed penalty under section 77A is aligned with the fixed penalty under section 40(1)(d) of the Pensions Act 2008 for failure to comply with similar information gathering requirements in connection with Automatic Enrolment?

9) If not, please state the level you think would be appropriate and why.

10) Do you agree that £200 is an appropriate level for an escalating penalty to be imposed on an individual under section 77B?

11) Do you agree it is appropriate that the escalating penalty for an individual under section 77B is aligned with the escalating penalty under section 41(1)(d) of the Pensions Act 2008 for failure to comply with similar information gathering requirements in connection with Automatic Enrolment?

12) If not, please state the level you think would be appropriate and why.

13) Do you agree that the escalating penalty regime proposed is appropriate for persons who are not individuals who continue to fail to comply with The Pensions Regulator’s requests for information? If not, please indicate the level of penalty you think is appropriate and why. If you think a different approach for non-individuals is more appropriate, please give details along with your reasons.

1. Earnings before interest, taxes, depreciation and amortization (EBITDA) is a measure of company profitability used by investors. It is helpful for comparison of one company to another in the same line of business. In some cases, it also can provide a more accurate view of the company’s real performance over time. ↩

2. In respect of the c.9,600 employers who sponsor schemes which The Pensions Regulator is certain are in scope, it is believed that c.91% publish accounts. ↩

3. In the small number of cases where these accounts are not available, The Pensions Regulator would need to consider the use of section 72 to acquire the information necessary. ↩

4. In terms of the proportion of Defined Benefit schemes to whom The Pensions Regulator can issue Contribution Notices, The Pensions Regulator anticipates that they have c.92% coverage of the ‘Defined Benefit Universe’, and a small minority of schemes are excluded from the power to issue Contribution Notices. ↩

5. As required to be prepared by section 394 of the Companies Act 2006. ↩

6. In certain circumstances, the deficit in a Defined Benefit pension scheme can become a debt due from the sponsoring employer. These circumstances are outlined in section 75 of the Pensions Act 1995, and include scheme wind-up and employer insolvency, or applications to the Pension Protection Fund. The debt that then becomes due from the employer is known as ‘section 75’ debt and is usually calculated by reference to the cost of providing the benefits via an insurance product, otherwise known as a buy-out. ↩

7. Section 40 Pensions Act 2008 and regulation 12 of The Employers’ Duties (Registration and Compliance) Regulations 2010 (2010/5) ↩

8. The Pensions Regulator, Monetary Penalties Policy ↩