In a case which has implications for both private and public sector pension schemes, the Pensions Regulator has explained why, following a decision by its Determinations Panel, it has for the first time ever issued a fine against the scheme manager of a public service pension scheme. The fine of £1,000 was levied against the London Borough of Barnet Council as scheme manager of the Barnet Pension Fund, part of the Local Government Pension Scheme.

In a regulatory intervention report dated July 2017, issued under section 89 of the Pensions Act 2004, the Pensions Regulator (tPR) explains why it imposed a fine of £1,000 on the London Borough of Barnet Council, as the scheme manager for part of the LGPS, for failure to submit a scheme return by the date specified in the scheme return notice.

The managers of public service schemes, like trustees and managers of other registrable schemes, are required to provide tPR with a document called a ‘scheme return’, in accordance with section 64 of the Pensions Act 2004. Depending on the nature and size of the scheme, trustees and managers are sent a scheme return notice at least once every three years. Managers of public service schemes are issued a scheme return notice annually, which summarises the information required and the date it is due (typically, six weeks starting from the date the notice is issued).

Facts of the case

On 9 July 2016, tPR issued a scheme return notice to LGPS scheme manager, London Borough of Barnet Council, requiring the scheme return to be submitted by 12 August 2016. The scheme manager failed to comply with this requirement and, following several further communications, the scheme return was still not provided. The failure was referred to the Determinations Panel on 24 February 2017.

Taking into account tPR’s statutory objectives, which include promoting and improving the understanding of the good administration of work-based pension schemes, and that there are almost 23,000 members in the fund, the Panel considered the case on 8 March 2017 and took the decision to impose a fine.

Importance of the scheme return

The regulatory intervention report, explains why the scheme return is so important. Completion of the scheme return is “a basic administrative responsibility” and if it is not submitted…this may signal further governance and administration problems within the scheme”. Good scheme governance is a key factor to achieving positive outcomes for members, and tPR’s action increases the chances of achieving this. Scheme returns give tPR an understanding of the pensions landscape which feeds into identification of risks, education initiatives and policy formulation.

Up-to-date and accurate data is essential to enable tPR to carry out its functions effectively. The scheme return asks for up to date contact details for a scheme’s trustees or managers and employers. This information is also shared with the Pension Tracing Service so members can search for and secure their pension benefits.

Conclusions

tPR will consider issuing a financial penalty using its powers under section 10 of the Pensions Act 2004 in any case where “despite efforts to encourage them, the trustees or managers of a scheme have failed to comply”. In a recent compliance and enforcement bulletin, the Pensions Regulator confirmed that it has adopted a “zero tolerance” approach to failure to submit a scheme return. This case illustrates the zero tolerance approach and underlines the importance of all schemes, whether they are in the private or public sector, complying with the requirement to submit a scheme return by the date specified in the scheme return notice. Managers and trustees who fail to provide the scheme return by the deadline can be fined up to £5,000 per individual and £50,000 in any other case.