Smart Pension and Moore Stephens fined for non-compliant chair’s statements

James Phillips reports...

The trustees of the Autoenrolment.co.uk and Moore Stephens master trusts have been fined for “deficient” chair’s statements after failed court action against The Pensions Regulator (TPR).

In a First-Tier Tribunal decision, EC2 Master – the trustee of Smart Pension’s Autoenrolment.co.uk master trust – was ordered to pay £2,000 after its statement for 2015/16 was found by judge David Hunter QC to be “deficient in five respects”.

The compliance failures were found in reporting on the latest default statement of investment principles (SIP); the date of the last review of the default SIP; trustee knowledge and understanding during the scheme year; information on how the majority of trustees and chair were non-affiliated; and, how members were encouraged to share their views and were represented.

In a separate case, the trustees of the Moore Stephens Master Trust saw a £2,000 fine reduced to £500 after judge David Thomas agreed their 2016/17 statement was non-compliant in one of three areas where TPR had claimed deficiencies.

While the judge agreed with TPR’s assessment that there was non-compliance on reporting on how members were encouraged to share their views and were represented, Thomas rejected the regulator’s views on reporting of trustee knowledge and understanding and core financial transactions.

Now, TPR has warned schemes to ensure they are complying with the law when writing chair’s statements, noting that fines for failure in this regard are mandatory.

Executive director for frontline regulation Nicola Parish said she was “pleased” the fines had been held or partly upheld by the judges.

“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,” she said. “That’s why it is the law for trustees to produce chair’s statements and make sure they contain all of the necessary information.”

She added: “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.”

A Smart Pension spokesperson said the statement was the scheme’s first “public-facing” and produced before there was regulatory guidance and when “the regulator’s expectations were far from clear”.

“We appealed against it because we wanted to better understand the regulator’s position on why our notice was upheld while 80 others were revoked,” they added. “It took legal action to provide adequate clarity on the regulator’s decision making, which was far from transparent and which reflected its views on timing of responses.”

They added that, while the notice was upheld, the judge reflected that the “regulator might ‘consider again the material procedures with regard to fully transparent review decisions'”.

“We fully support the regulator’s efforts to raise standards, but the key learning from this case is that it must be clearer about its expectations and more transparent in its decision making.”