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Tougher pensions regulation is coming in the UK

Written by
Lewis Silkin, widely recognised as the UK’s leading specialist employment law practice.
The UK Pensions Regulator has increased its scrutiny of UK-based schemes and proposed new legislation will give it tougher enforcement powers. This article gives details and includes comments from other jurisdictions on enforcement of the pension rules in their countries.

The last few years have seen a movement in the UK towards increased regulatory intervention in pension schemes, and harsher punishments for those not complying with their obligations. The UK Pensions Regulator has promised to be ‘clearer, quicker and tougher’ and is likely to be given further powers in the near future to help achieve this.

The Pensions Regulator’s existing powers

The UK Pensions Regulator already has powers to punish bad behaviour in relation to work based pension schemes (a separate body, the Financial Conduct Authority, regulates insurance based pension arrangements). These powers include the ability to gather information and to inspect premises. Crucially, it also has the following anti-avoidance powers, enabling it to act against a sponsoring employer (and those associated or connected with that employer) in relation to a defined benefit (DB) scheme:

  • contribution notices: under which the Pensions Regulator can require payment to be made into a scheme; and
  • financial support directions: requiring financial support to be put in place for a scheme.


The turning point

There have been a number of recent, high profile examples in the UK of corporate activity resulting in concerns about the protection of members’ DB pensions. Following subsequent public and political pressure, the regulatory system is now under review. Whilst the current system is regarded as being ‘robust’, some changes have been proposed to ‘build on the Regulator’s existing powers to enable [it] to be a stronger and more proactive Regulator’.

Increased monitoring

We are already seeing increased levels of scrutiny from the Pensions Regulator in the running of schemes.

In October 2018, the Pensions Regulator launched a new approach to monitoring schemes, which it said meant that all schemes could ‘expect the volume and frequency of their interactions with [the Regulator] to increase’. This new approach includes one-to-one supervision of some pension schemes that the Pensions Regulator has assessed as being of strategic importance. This supervision involves ongoing contact and a detailed investigation of the governance of those schemes.

The Pensions Regulator is also undertaking higher volume supervisory approaches for a broader group of schemes, with more than a thousand schemes being contacted with questions (for example, relating to matters such as dividend payments to the sponsoring employers’ shareholders, the length of recovery plans as part of DB scheme funding requirements, and efficient record-keeping).

In addition to the above, recent draft legislation suggests that the Pensions Regulator will be given wider information gathering powers to help it with its investigations, as well as the new sanctions outlined below.

New potential offences and penalties

A number of new criminal offences and tougher penalties have been proposed in recent draft legislation:

Criminal offences

  • failure to comply with a contribution notice; punishable by an unlimited fine;
  • avoidance of an employer debt to a DB pension scheme (an employer debt is calculated by reference to the cost of buying benefits out with an insurance company and is triggered on the occurrence of certain events): punishable by an unlimited fine and/or up to seven years in prison;
  • conduct risking accrued scheme benefits: punishable by an unlimited fine and/or up to seven years in prison.


Civil penalties

The Pensions Regulator also looks set to have power to impose a civil penalty of up to GBP 1 million:

  • in the same circumstances as the criminal offences outlined above; and
  • where a person knowingly or recklessly provides the Pensions Regulator (or pension scheme trustees in certain circumstances) with false or misleading information.


As the new offences are designed to strengthen the Pensions Regulator’s current powers, and to give it a broader remit for punishing bad behaviour, the draft legislation is aimed at a wide range of situations and potential targets.

The tougher regulatory future

In practice, the UK Pensions Regulator has historically used its most severe powers on a limited number of occasions. However, more recently, the Pensions Regulator has shown that it can and will issue punishments. Its recent corporate plan noted that ‘over the past year we’ve used a broader range of our powers to deter and punish those who persistently fail to comply’ and, in the first half of 2019, it issued one of its largest fines on an employer for failure to comply with the law.

The changes set out in the draft legislation are currently on hold while the UK awaits the outcome of a General Election on 12 December 2019. However, we understand that there is cross-party support for the Pensions Regulator’s new powers and, as such, they are likely to be introduced whoever ends up in Government. What remains to be seen is how the Pensions Regulator will ultimately use its new powers.

Angela Stafford
Senior Associate - United Kingdom
Claire Carey
Partner - United Kingdom