The Pensions Regulator (TPR) has issued its first fines against master trust schemes for governance failings, after identifying a number of cases where a chair’s statement had not been completed, and has warned that it will impose the highest penalties in circumstances where professional trustees are involved
The trustee of Nurture Master Trust, MC Trustees Ltd, was ordered to pay a maximum fine of £2,000 for failing to prepare a chair’s statement for the scheme, which was imposed because the scheme had a professional trustee in place and there were no mitigating factors.
In separate action the trustees of the Save and Prosper Funds were fined a total of £3,020 after failing to prepare a chair’s statement for three master trust schemes. These are the Save and Prosper Personal Retirement Account, Save and Prosper Company Pension Scheme and Save and Prosper Personal Retirement Account Simplified Pension Scheme.
Under rules introduced in 2015, trustees of defined contribution (DC) pensions must publish an annual statement within seven months of the end of the scheme’s reporting year.
In its regulatory intervention report TPR said fines could range between £500 and £2,000 and are calculated according to the scheme size, any previous failures to prepare a statement, and whether there is a professional trustee in place.
Nicola Parish, executive director for frontline regulation at TPR, said: ‘Completion of the chair’s statement by trustees is a basic requirement of good governance and we expect trustees to comply.
‘We will enforce the law and impose a penalty where trustees of schemes fail to prepare an annual governance statement signed by the chair of trustees. These requirements apply equally to trustees of master trusts.’
In all the schemes investigated, the relevant trustee has now produced chair’s statements.
PwC has released new figures from the firm’s Skyval Index which provides a healthcheck of around 6,000 pension funds, which shows the deficit of DB pension funds stood at £560bn at the end of 2016, £90bn higher than at the start of 2016.
If companies tried to repair the additional deficits which arose during 2016 within 10 years, this would cost an extra £10bn per year, and the firm says there may be a case for longer deficit repair periods in some cases to help avoid undue strain on companies and economic growth.
Raj Mody, PwC’s global head of pensions, said: ‘I expect that 2017 will be the year when pension fund trustees and sponsors reach more informed conclusions about how to tackle their pension deficit and financing strategy. Those involved are increasingly realising the importance of transparency in order to decide appropriate strategy.
‘DB pensions are long-term commitments stretching out over several decades and so there is limited value in pension funds making decisions based on simplified information. There is a need to understand the cashflow profile of the fund year-by-year, not just summarised figures.’
Separately, YouGov research for The People’s Pension master trust conducted with 900 businesses at the end of 2016 has revealed strong support for auto-enrolment (AE) amongst SMEs, whether they have already staged or not.
The survey found that 51% of SMEs that had already staged supported lower paid workers currently outside auto-enrolment being brought in. The same percentage also supported the self-employed being brought into AE, an issue which is to be a focus of a forthcoming government review of the policy, announced late last year by Richard Harrington, the pensions minister.
Over two thirds (70%) of SMEs that had already staged thought AE was a good thing for their employees, while half (50%) thought it was a good thing for their business.
There was also reasonable support for compulsion amongst SMEs, with 43% of those that have already staged saying that they thought all eligible employees should be forced to pay into a workplace pension, with no opt outs.
The research found that over a third (37%) of SMEs that had staged were already paying more than the 1% minimum contribution to all employees in their workplace pension scheme, while 46% agreed that businesses had a role to play in minimising opt outs amongst their employees.
Darren Philp, director of policy and market engagement at The People’s Pension, said: ‘The government’s 2017 review of auto-enrolment has the potential to build on its success so far. It is an opportunity to widen access to pensions and make sure more people benefit from saving for the long term.’
TPR’s regulatory intervention report is here.
