Government action on pension scams – a work in progress

The Government has published its response to last December’s consultation on various means by which it intends to disrupt the activities of pension scammers (see Pensions Bulletin 2016/49).  However, despite getting overwhelming backing, it will be some time before its proposals are put into action.

A ban on cold calls

The ban on cold calling in relation to pensions is to go ahead, with the ban extended to include all electronic communications on pensions, but more work is needed “on the final and complex details” of the ban during the course of this year.  And even after this point, the legislation (for which there remains no sight) will only be brought forward when Parliamentary time allows.

Limiting the statutory right to a transfer

This is also to go ahead, with the Government intending to work closely with industry, consumer groups and other stakeholders during the course of this year to help finalise the details of its proposals.  Therefore, the statutory right to a transfer will be limited to where the receiving scheme is:

• A personal pension scheme operated by an FCA-authorised firm or entity;
• An occupational pension scheme, for which a genuine employment link between the employer and scheme must be demonstrated
• An occupational pension scheme which is an authorised master trust

The alternative option of a statutory discharge letter and cooling-off period will not be pursued.

In finalising the above, the Government will be considering:

• How best to implement the employment link
• How legitimate transfers to QROPS can come within the statutory transfer framework
• Whether to underline the need to undertake due diligence in legislation
• Whether trustees or managers should have the power to amend their scheme rules in order to accommodate non-statutory transfers where there is no such power already

Once the Government has the technical details of its proposals finalised it will hold them back to await the roll out of the authorisation regime for master trusts, which itself will not be fully in place until 2019.

Make it harder to open fraudulent schemes

The Government intends to introduce legislation in a Finance Bill later in 2017 aimed at ensuring that only active companies can register a pension scheme.  HMRC is to be given discretion to register schemes with dormant sponsoring employers for legitimate cases.

The Government will also:

• Introduce additional changes to the scheme registration process designed to stop schemes being registered without the consent of their sponsoring employer
• Engage with industry, consumer groups and other stakeholders to consider feedback on options to professionalise small self-administered schemes

Comment

Whilst it is clear that there is work to be done before the first two of these measures can become law, it is disappointing that there will be a significant delay.  One can’t help but think that Brexit is having a hand in slowing down necessary domestic legislation.

Box Clever heads for hearing on the substantive issues at the Upper Tribunal

The long-running Box Clever legal saga took an important step recently – the Court of Appeal rejecting ITV’s request to seek permission to appeal against the judgment handed down by the Upper Tribunal last November.  The issue being tested was the Regulator introducing fresh evidence between its warning notice and the determination that concluded it was reasonable to impose a Financial Support Direction in 2011 (see Pensions Bulletin 2016/46).

As reported by the Pensions Regulator, ITV failed to advance any arguments that would allow the Court of Appeal to become involved.  So the way is now clear for the substantive issues in this case to be determined by the Upper Tribunal.  The hearing for this is scheduled to start on 29 January 2018 and is expected to last for two weeks.

Comment

At last we are getting close to a judicial examination as to whether or not the Regulator was within its powers to issue a Financial Support Direction – but it will be some seven years after the event and more than a decade since the Regulator started its investigations.

Regulator to prosecute Chappell for withholding documents

The Pensions Regulator has confirmed that it is to prosecute Dominic Chappell, the director of Retail Acquisitions Ltd when it bought BHS, for failing to provide information when required to do so.  Mr Chappell has been summonsed to appear at Brighton Magistrates Court on 20 September 2017.  The enforcement action against Sir Philip Green in relation to BHS ended earlier this year (see Pensions Bulletin 2017/09).

The failure to provide information requested by the Pensions Regulator under section 72 of the Pensions Act 2004 without a reasonable excuse is a criminal offence which can result in an unlimited fine.

Comment

Whilst this action is unlikely to benefit BHS pension scheme members, the Regulator is sending as strong a signal as it can that those who refuse to play ball will suffer the consequences.

This Pensions Bulletin does not constitute advice nor should it be taken as an authoritative statement of the law. For further help, please contact David Everett at our London office or the partner who normally advises you.