The Pensions Act 2004 gives the Pensions Regulator (the Regulator) the main objectives of protecting pension benefits, reducing the risk of claims on the Pension Protection Fund (PPF) and promoting good administration of pension schemes.
The Regulator is therefore given wide powers and, to help it gather information, section 69 of the Pensions Act 2004 has imposed, since 6 April 2005, various duties on trustees and employers to make reports to the Regulator. These duties arise even in the absence of a request from the Regulator. This briefing looks at trustees’ and employers’ duties to report certain events (section 69; others don’t have this duty at the moment, although this may change).
What is the duty?
Except where the Regulator otherwise directs, the trustees or the employer must give the Regulator notice of any ‘notifiable event’. The category of persons under this duty can be (but has not yet been) extended by regulations – for example, to include a former employer or an associated person of an employer.
‘Eligible schemes’ are those eligible to be covered by the PPF – ie all schemes that are not money purchase schemes, prescribed schemes (eg schemes that are not registered with HM Revenue and Customs) and schemes being wound up immediately before 6 April 2005.
A ‘notifiable event’ is an event prescribed in regulations relating to a scheme or an employer.
Which events must be reported?
The 2005 Notification Regulations and the Employer Debt Regulations 2005 set out the events that are notifiable (please see the tables attached).
In a formal direction, the Regulator has set out exceptions in which trustees and employers will not be under an obligation to report certain events that would otherwise be notifiable. The exceptions will not apply if the scheme is funded below the PPF buyout level (even if the employer and scheme have agreed a recovery plan to remedy a scheme deficit). The exceptions will also not apply if the trustees have reported a materially significant failure by the employer to make a payment to the scheme in accordance with the schedule of contributions.
Timing and formal requirements
The notice to the Regulator must be given as soon as reasonably practicable after the person making it becomes aware of the notifiable event (this must be before the actual action concerned for some events – eg a decision to make a transfer payment must be notified before the transfer is made).
The Regulator’s guidance indicates that the obligation implies urgency: ‘For example, where a trustee is made aware of a notifiable event on a Sunday, the Regulator should be notified on Monday.’
The code of practice suggests that a procedure for making notifications should be put in place. It envisages that there will not be a need for specialist advice or to hold a trustee or board meeting about the notification.
The notice to the Regulator must be in writing; email and fax are acceptable. A standard form is available on the Regulator’s website: www.thepensionsregulator.gov.uk.
An actuary or other person under a duty to report breaches in the law to the Regulator (see our briefing ‘Reporting breaches of the law’, number 125, January 2005) will be obliged to make a report if it becomes aware of a failure by the trustees or employer to notify under section 69.
Section 10 of the Pensions Act 1995 (civil penalties) applies for non-compliance without reasonable excuse. The maximum civil penalty is £50,000 for companies and £5,000 for individuals. Directors who cause a company to fail to comply with the obligation can also be liable to a civil penalty under section 10(5).
The Regulator has indicated in the code of practice that it will seek an explanation of any failure to notify. It has a range of actions that it can take, including training or other assistance. The Regulator will also consider any failure to notify a relevant event when deciding whether to issue a contribution notice (under the moral hazard powers given to the Regulator).
Obligation on non-employers
If a financial support direction has been made, the persons subject to the direction will also be obliged to notify various matters to the Regulator. These include the section 69 events.
A guarantor under a withdrawal arrangement or an approved withdrawal arrangement for the purpose of the statutory debt on employer provisions (section 75 of the Pensions Act 1995) is also obliged to notify the Regulator of the section 69 events. There are minor differences between the events that require notification from guarantors and events that require notifications from employers and trustees.
Changes to the notifiable events regime
From 6 April 2009 trustees will no longer be required to notify the Regulator if there are two or more changes in key scheme posts, and employers will not be required to notify the Regulator of changes in their credit ratings or two or more changes in key employer posts (see attached tables for more information on which events are notifiable).
These changes are not retrospective so presumably there will still be a duty to notify the Regulator if these ‘events’ happened before 6 April 2009. In October 2008 the government said that the Regulator proposed to clarify and update its directions that set out exceptions to the notifiable events regime. However, it has not yet published any formal proposals on this.
Sources of more information
- Section 69 of the Pensions Act 2004.
- The Occupational Pension Scheme (Employer Debt) Regulations 2005 (SI 2005/678).
- The Pensions Regulator (Notifiable Events) Regulations 2005 (SI 2005/900).
- The Pensions Regulator (Miscellaneous Amendment) Regulations 2009 (SI 2009/617).
- Occupational Pension Schemes (Miscellaneous Amendments) Regulations 2005 (SI 2005/2113).
- Paragraphs 2.56-2.62 of the government’s response to the consultation on the amendments to the anti-avoidance measures in the Pensions Act 2004.
- The Pension Regulator’s Code of Practice 02 – Notifiable Events.
- The Pension Regulator’s Directions under section 69(1) of the Pensions Act 2004.
- The Pension Regulator’s table of conditions.
- The Pension Regulator’s notifiable events framework.