Even without the much-publicised but rare cases of pensions scheme fraud, mistakes are frequently made, including failure to comply with the ever-increasing legislation.
The Goode Committee recommended that “every breach of duty should carry a sanction” and this has been carried through into the Pensions Act 1995. Indeed, there are now so many offences and sanctions it is difficult to know where to start. The DSS has produced a checklist running to 22 pages and listing 99 offences.
However, the following half-dozen offences may be easily committed by trustees. And while the Occupational Pensions Regulatory Authority (Opra) is unlikely to pounce on every minor infraction – first offenders can probably sleep easy – it still has the power to impose penalties.
Failure to establish or correctly implement an internal dispute resolution procedure for the pensions scheme
Opra can impose a civil penalty on individual trustees of up to £1,000 each or £10,000 in respect of a corporate trustee. And that is just for failing to implement the proper procedure, regardless of the merits of whatever the dispute was about in the first place.
Failure to provide a statement of the member's cash equivalent of his benefits within eight days of a guarantee date, that date itself being within three months of the member's request
The three-month period can be extended if the trustees are unable to obtain the information needed to make the calculation. But failure can result in a civil penalty of £1,000 per individual trustee. Trustees must inform Opra of any failure to give effect to a request for a transfer payment within six months and if Opra finds they have failed to take all such steps as are reasonable to ensure the payment was made, it can impose a further penalty.
Failure without reasonable excuse to notify members of a material alteration in the information contained in the scheme booklet (for example a change in scheme benefits), where practicable before the change and in any event within three months
It is not clear what might satisfy Opra as a “reasonable excuse” but this is considered a low-level offence – a maximum penalty of £200 for individual trustees or £1,000 for a corporate trustee.
Failure to obtain audited accounts within seven months of the end of the scheme year
It is not too unusual to find schemes failing to obtain accounts within this period. However, in future, this will be a criminal offence. Magistrates could fine trustees up to £5,000.
Failure to keep proper records of trustee meetings
This is considered a serious failing on the part of trustees. Opra can impose a penalty of up to £5,000 on individual trustees and £50,000 on corporate trustees. Furthermore, if Opra believes the trustees are in serious or persistent breach of this requirement, it can remove the trustees from office. And failure to retain these records for at least six years can also give rise to a £5,000 penalty.
Failure to notify Opra within 30 days if the employer does not pay a contribution in accordance with the schedule of contributions, or to notify members within 90 days if a payment is 60 days late
There is no real excuse for trustees not complying with this requirement and the penalties that can be imposed by Opra are appropriately high – up to £5,000 for individuals and £50,000 for corporate bodies and, for persistent or serious breach, removal as a trustee.