Sleeping on the job – a hazard for trustees

Following the agreement, the Pensions Regulator has agreed to cease regulatory action and has published a regulatory intervention report on the findings of its anti-avoidance action against Coats.

The report was issued presumably to show the regulator had flexed its muscles for the benefit of scheme members and to illustrate the behaviour expected of employers and trustees. It explains the regulator’s approach, emphasising that it will use its powers against solvent employers where reasonable and will work with all parties to reach a positive, fair, negotiated outcome for members.

Trustees need to be alert

The case emphasises that vigilance is required of trustees. The regulator took action following an approach by trustees. The atmosphere of vigilance has been particularly heightened following the BHS scandal.

In its recent regulatory intervention report on BHS, the regulator has said the “key areas where we recognise that we could have performed better are the timeliness of our engagement and the clarity of our communications”.

To be vigilant, trustees must be alert to dangers and react quickly: they can’t sleep on the job. They must monitor the activities of their employers and be prepared to challenge and report them.

This Coats case also shows that employers may not be able to avoid publicity by reaching a settlement with the regulator, which may strengthen the trustees’ hand in the early stages of negotiations.

Mark Ridler is legal director at law firm Hill Dickinson