Warnings for pensions trustees over chair’s statement
Pensions trustees have been warned to produce a chair's statement which is compliant with the law, after fines against two schemes were upheld in court
24 Apr 2019
The Pensions Regulator (TPR) took action against the two schemes after discovering trustees had failed to include the required information in their annual statement. Trustees appealed the decisions to the First Tier Tribunal (FTT).
The judges on both tribunal cases agreed that penalties for non-compliance were mandatory, the chair's statements were non-compliant with the law and TPR was right to issue the fines.
In the case brought by EC2, trustee of Autoenrolment.co.uk, the judge ruled that the chair's statement for 2015/16 was ‘deficient in five respects’. TPR fined the scheme trustee £2,000 for the breach, which was upheld.
The judge said the requirements stated schemes should not simply prepare an annual governance statement, but ‘prepare a statement containing a considerable amount of clearly specified and detailed information’.
The non-compliance included failing to include the latest default statement of investment principles; failing to provide the date of the last review of the default statement of investment principles; failing to adequately describe how trustee knowledge and understanding was met during the scheme year and enables to properly exercise their functions as trustees or managers of the scheme; failing to include information about how the requirement for the majority of trustees and the chair to be non-affiliated were met; and failing to provide details of how members were encouraged to share their views and how they were represented.
The case brought by trustees of the Moore Stephens Master Trust was upheld by the judge in one of three areas which were deemed by TPR to be non-compliant. The judge found that the chair's statement did not satisfy the requirements in one aspect (encouragement of members to express their views to trustees) but was compliant in the other two (trustee knowledge and understanding and core financial transactions). As a result, the TPR fine was reduced from £2,000 to £500 (the statutory minimum). The chair's statement was for the scheme’s 2016/17 year.
The judge ruled that as the scheme was a master trust with a professional trustee, and ran schemes for multiple employers, that ‘some penalty’ for the failure was ‘therefore appropriate’.
Nicola Parish, executive director for frontline regulation at TPR, said: ‘Annual chair's statements are an essential way to show pension savers that their scheme is being properly governed and will deliver the retirement benefits they are promised. That’s why it is the law for trustees to produce chair's statements and make sure they contain all of the necessary information.
‘We are pleased that the judges in these cases agreed that under legislation, a mandatory penalty applies to chair's statements which are not compliant.
‘As these cases clearly demonstrate, we are prepared to defend our penalties in court.
‘We continue to expect high standards of trustees and will take action when chair's statements are not compliant with the law.’
The 2,500-member Moore Stephens Pensions Master Trust was absorbed into Evolve Pensions' Crystal Trust following the merger between Moore Stephens and accountancy business BDO in February.