On the go:The Work and Pensions Committee has called for clarity from the Pensions Regulator over its Covid-19 enforcement procedures, voicing concerns that some “conscientious employers” will be reluctant to take advantage of easements.
In a report into the Department for Work and Pensions' handling of the coronavirus pandemic, the select committee said the regulator's remedies – including temporary contribution holidays for defined benefit sponsors and facilitating employers' reductions of defined contribution payments to the statutory minimums – broadly "strike the right balance".
However, "it remains to be seen how well this approach works in practice", the MPs wrote, warning that TPR's helping hand may go unused by some that need it, and abused by others.
"It may be that some conscientious employers, whose businesses and employees might benefit from a temporary pause in pension contributions, feel reluctant to rely on an assurance from the regulator that it will not enforce the requirements," the report said of DC businesses. But addressing DB deficits, it added: "Following our predecessor committees’ experience with BHS and Carillion, the Pensions Regulator must remain alert to the risk of unscrupulous employers not in financial difficulty seeking to take advantage."
The committee therefore recommended that the regulator maintain its vigilant stance on dividend payments from employers that have reduced their DB contributions, while upping its communications with SMEs paying into DC schemes.
"We recommend that the Pensions Regulator communicate its expectations clearly to all employers, especially smaller businesses, which may find it harder to make use of the short-term flexibility. We will be monitoring the impact of the Pensions Regulator’s approach over the coming months, and in particular how well it is working for small businesses," the report said.
David Fairs, TPR's executive director for regulatory policy, analysis and advice, said: “We welcome the committee’s report and their recognition of the flexible and pragmatic stance TPR has taken since the start of the COVID-19 pandemic.
“We have been clear in our latest guidance that, where employers in financial distress are offered help, it must be balanced with protections for scheme members and not abused. For example, where a firm has suspended deficit repair contributions because of COVID-19, we’ve said it would be unfair to resume dividend payments to shareholders before contributions have been restored."
Mr Fairs added: “The committee’s focus on the danger of scams is also welcome. We’ve already urged savers not to rush decisions about their pensions at this time and highlighted the free impartial guidance from the Pensions Advisory Service.
“In July, , run jointly by the FCA and TPR, will be relaunched. Last year, it reached three-quarters of pension savers between 45-65 urging them to get to know the warning signs of a scam and always check who they are dealing with.”
