The Pensions Regulator

Reporting code issued as Pensions Regulator launches

Ref: PN05-09
6 April 2005

The Pensions Regulator opened for business today and issued its code of practice on reporting breaches, the first of a series of 12 mandatory codes. The second code of practice on notifiable events has now been laid before Parliament.

Under the Pensions Act 2004, the regulator has extended powers which enable it to take a more risk-based approach to regulation.

One of its new regulatory tools is the code of practice, which includes guidance on how to comply with the new legislation for those running pension schemes.

Launching the new Pensions Regulator, chair David Norgrove said:

"I believe that the Pensions Regulator will quickly become established as an authoritative, positive presence in the pensions world. I am confident that we will make a real difference to the way companies and schemes tackle their issues, and that we will play a significant role in protecting members' benefits and increasing trust in work-based pensions."

Reporting breaches of the law

The new legislation, which comes into force today, extends the current reporting duty to a wider group of pensions professionals. The 'reporting breaches of the law' code of practice and supplementary guidance will help potential reporters fulfil their obligations under the new requirements.

Whistleblowers now include:

• trustees of occupational pension schemes;
• managers of personal pension schemes, including stakeholder schemes;
• employers participating in occupational pension schemes;
• scheme administrators;
• scheme actuaries, scheme auditors, fund managers and custodians of scheme assets; and
• others retained to advise trustees or managers.

Whistleblowers will be expected to report 'materially significant' failures to comply with the law, which put scheme members' benefits at risk.

However, the Pensions Regulator discourages reporting of compliance failures which do not pose a significant threat to members' benefits and which are being put right, so that the regulator can focus its resource on breaches that are a major risk to pension scheme members.

Notifiable events

The code of practice on notifiable events has now been laid before Parliament and is due to be issued as soon as the parliamentary process is complete. Employers, trustees and scheme managers of defined-benefit pension schemes have a duty to report notifiable events. The notifiable events framework provides the Pensions Regulator with early warning of problems with schemes or their sponsoring employers which may eventually lead to a 'call' on the Pensions Protection Fund. This will enable the regulator to assist schemes and employers before a 'call' on the Fund becomes inevitable.

Codes of practice

The Pensions Regulator has developed the codes of practice in consultation with the regulated community, the Department for Work and Pensions and other stakeholders. Its aim has been to make sure that the code is practical and relevant and meets the needs of those who need to use it.

Codes of practice are not statements of the law. However they do have evidential value, meaning they will be taken into account by a court or tribunal where relevant.

Following a formal consultation process, which began in December 2004, the code of practice on reporting breaches of the law was approved by the Secretary of State for Work and Pensions and laid before Parliament.

The final code, which has been issued with effect from today by order of the Secretary of State, has been published on the Pensions Regulator's website. The notifiable events code is also available on the website.

Editor's notes

• 'Reporting breaches of the law' gives practical guidance to help statutory reporters decide what should be reported. The code adopts a risk-based approach, where reporters are encouraged to use their professional judgement about what to report to the regulator. This will enable the Pensions Regulator to focus on matters that pose a serious risk to members' benefits.
• Once a report has been made, the Pensions Regulator will act according to the seriousness of the breach, its circumstances and any other information known to it. The Pensions Regulator will be able to assist and instruct trustees and others involved in running pension schemes to achieve compliance. It can act to recover contributions or restore assets, appoint and/or remove trustees, or impose fines where appropriate.
• Where significant breaches go unreported, the Pensions Regulator has the power to fine individuals up to £5,000 and companies up to £50,000 for failing to carry out their reporting duty
• The 'Notifiable events' framework deals with the duty to notify the Pensions Regulator of specified scheme-related events (which trustees/managers must report) and employer-related events (which employers must report). The Pensions Regulator has issued Directions releasing certain schemes and employers from the duty to notify the Pensions Regulator in circumstances where there is no significant risk to the Pension Protection Fund. However, all schemes and employers will have to report 'serious events' if they occur. Failure to notify is a civil offence, and the regulator has the power to fine individuals up to £5,000 and companies up to £50,000 for failing to notify.
• Initially, there will be 12 codes of practice. The first code, reporting breaches of the law, will be effective from 6 April 2005. The second code on notifiable events is due as soon as the Parliamentary process is complete.
• Codes of practice are not statements of the law. However they do have evidential value, meaning they will be taken into account by a court or tribunal where relevant.

• As of 6 April 2005, the Pensions Regulator is the new regulator of work-based pensions in the UK, with wider and more flexible powers under the Pensions Act 2004. It has replaced Opra which has now ceased to exist.

  The new powers of the Pensions Regulator will include the ability to:

  • collect more detailed scheme information;
  • impose a statutory obligation so that 'whistleblowers' will report suspected breaches of the legislation to the regulator;
  • issue improvement notices and third party notices, allowing the regulator to ensure problems are put right;
  • freeze a scheme that is at risk, while the regulator investigates; and
  • prohibit trustees who are judged not fit and proper to carry out their duties.