On 3 February, the Pensions Regulator launched consultation on proposals for the regulation of record keeping. In the same document, the Regulator reviews compliance with its January 2009 "best practice" guidance on the same subject and expresses concern that the importance of high standards in this area is "not well enough understood" and that there has been "no evidence of marked improvement in administration practices".
Hence, the Regulator proposes to toughen its approach. Amongst the new measures proposed are:
- A campaign to promote the January 2009 guidance.
- A review of the Regulator's risk parameters to ensure that reports to them for other purposes (for example, funding) consider whether there may be underlying record-keeping problems.
- Continued discussion with the audit profession to ensure that the review of internal controls fully embraces the risk of poor data and the possible implications of these for the certification of scheme accounts.
- The Regulator also proposes to select a number of schemes (based on pre-defined risk criteria) in respect of which they would require data tests to be carried out.
Evidence of poor record keeping will lead to enforcement action, potentially including:
- Directions (for example, to rectify errors) using Improvement or Third Party Notices under the Pensions Act 2004.
- Fines for failing to comply.
- The prohibition of trustees and/or appointment of new trustees (in extreme cases).
- Publishing details of the action taken.
In practice, this means that any contact with the Regulator could result in the scheme being asked to demonstrate compliance with the record-keeping guidance. If schemes are found not to be in compliance, the Regulator could take enforcement action including (ultimately, in some cases) the imposition of financial penalties. The Regulator also expects professional advisers who encounter data issues to report them to the client.
The Regulator's January 2009 guidance can be found here The Regulator proposes to publish an update at the end of 2010 and plans to review its approach in advance of the workplace pension reforms in 2012.