High fines policy (information requirements)

This policy provides guidance on our approach to information requirements, dealing with penalties for breaches of the notifiable events regime and penalties for providing us or a trustee with false and misleading information.

Published: 4 May 2022

When this policy applies

1. We have the power under s88A of the Pensions Act 2004 to impose a financial penalty not exceeding £1million if a person has committed an act (which includes a failure to act) to which this section applies.
2. A financial penalty under s88A is discretionary, and the decision whether to impose a penalty and if so the amount of the penalty, is reserved to the Determinations Panel.
3. We also have the power to impose other discretionary and mandatory penalties and our approach to these penalties is set out in our monetary penalties policy.
4. The following sections of the monetary penalties policy are relevant to this policy and will be taken into account when we are considering imposing a penalty under s 88A of the Pensions Act 2004:
   
   • Bodies corporate, Scottish partnerships and individual officers
   • Restriction on use of scheme assets to provide indemnification for certain penalties
   • Procedure
   • Hardship
5. This policy specifically applies where a person:
   
   1. has failed, without reasonable excuse, to comply with the requirements of the Notifiable Events regime (s69(7), 69(8) and 69A(13) of the Pensions Act 2004)^[1]
   2. has knowingly or recklessly provided false or misleading information to TPR (s80A(1) of the Pensions Act 2004) or
   3. has knowingly or recklessly provided false or misleading information to trustees in particular circumstances (s80B(2) of the Pensions Act 2004)
6. We also have the power to issue a high fine in other circumstances that are not covered by this policy. These apply where a person:
   
   1. has failed to pay a debt due by virtue of a contribution notice (CN) issued under s38 of the Pensions Act 2004 without reasonable excuse (s42B(2) of the Pensions Act 2004)
   2. was party to an act or deliberate failure to act which:
      
      1. had a main purpose of avoiding an employer debt to a pension scheme (s58C(2) of the Pensions Act 2004) or
      2. had a materially detrimental effect on the likelihood of accrued scheme benefits being received, and the person knew or ought to have known that their act or failure would have that effect (s58D(2) of the Pensions Act 2004)
   and, in the case of b.i. and b.ii, it was not reasonable for the person to act or fail to act as they did.
   

   For information on how we approach these penalties, please see our high fines policy (avoidance).

7. S88A to 88C of the Pensions Act 2004 set out the conditions, processes and procedures that apply to these penalties, and their recovery in the event they are unpaid.  Please also read our enforcement policy for more information.
8. We cannot impose a financial penalty on a person:
   
   • if a penalty notice has been issued to them under s10 of the Pensions Act 1995 in respect of the same act
   • if they have been convicted of an offence in respect of the same act or where criminal proceedings have been commenced but not concluded against the person in respect of the same act; or
   • in the case of a corporate body, where a penalty is also imposed on an individual of that corporate body in respect of the same act, on the basis of that individual’s consent or connivance in respect of that act
9. The maximum financial penalty that may be issued is the same, regardless of whether the person being fined is an individual or a company.
10. In respect of a failure to comply with the requirements of the Notifiable Events regime [in 5 a. above], if an obligation to notify exists under s69 and  s69A of Pensions Act 2004, we may consider issuing fines under both ss69 and 69A for the same event.
11. We may have the option to pursue a criminal prosecution in respect of an act that could be caught by the financial penalty power [listed under 5 b. above], of knowingly or recklessly providing false or misleading information to TPR. For more information about our approach when we have such a choice such as this, please read the overlapping powers section of our enforcement policy.

Footnotes for this section

• [1] This policy will only apply once the new powers related to Notifiable Events introduced in the Pension Schemes Act 2022 come into force. 

The penalty amount our approach

12. Any decision to seek to impose a penalty will be reached in line with the approach set out in our enforcement policy.
13. Where we decide to impose a financial penalty, we expect to calculate the penalty amount in accordance with the following framework.
14. The calculation of the penalty, and the amount arrived at, will depend on:
    

    Step 1: assessment of the applicable band level, which depends on the person’s level of culpability and the harm caused to the scheme and/or member outcomes, and

    Step 2: assessment of any aggravating and mitigating features.

Step 1: Band level: culpability and harm

15. When determining the band level for a particular penalty, we will take account of:
    
    • the level of culpability of the person, and
    • the degree of harm to the scheme and / or member outcomes as a result of the act
16. Based on the integral features of these penalties, we expect Band R to typically only be used for failures to comply with the Notifiable Events regime under s69 and 69A of the Pensions Act 2004 where the breach(es) only caused minimal harm to the scheme.
17. The table below shows the range of the penalty amount that corresponds to each band level:
    

    Band		Penalty Banding
    Band 'R'	Breach of regulatory requirement with minimal harm to the scheme	£0 to £100,000
    Band HF1	Lower culpability / Lower harm	£100,000 to £400,000
    Band HF2	Higher culpability / Lower harm   or Lower culpability / Higher harm	£250,000 to £650,000
    Band HF3	Higher culpability / Higher harm	£400,000 to £1 million

18. We will consider evidence of any features of culpability and harm, on the facts (examples of which are listed below), and their severity (individually and collectively), when determining the band for the penalty.
19. Examples of features of culpability include:
    
    • deliberate act or failure
    • knowledge of the adverse consequences of the breach and / or act on the scheme or our ability to regulate
    • recklessness / negligence as to adverse consequences for the scheme or our ability to regulate, including disregard of risks or lack of care, whether based on actual foresight or what could reasonably be expected to have been known
    • significant decision-making power, responsibilities, influence and / or proximity to the decision-making
    • holding a position of trust or being subject to professional duties

    And for failure to comply with the notifiable events regime penalties only:

    • any further failure to report the breach within a reasonable period of it being identified

    And for providing false / misleading information penalties only:

    • if the person took no steps, or they were insufficient to correct the information within a reasonable period of identifying that it was or may have been false or misleading
20. The assessment of the level of a person’s culpability is not simply a question of the number of culpability features engaged on a given set of facts, but also the level of engagement of any such features. The culpability of a person whose conduct involves a number of features moderately may be less than that of a person whose conduct has engaged a single culpability feature significantly.
    

    For example, an intentional act by a person to avoid regulatory intervention, is likely to attract high culpability. By contrast, a failure by the finance director of an employer (who is also a trustee of the scheme) to file a form to tell us of an employer-related notifiable event through lack of care, but where the employer is already in active, open and transparent engagement with us about the event, is likely to fall within lower culpability.

21. Examples of features of harm include:
    
    • any negative impact on the scheme as a whole or any of its members
    • whether the act has had an impact on the ability of the trustees to appropriately take account of and / or represent the interests of the scheme or any of its members
    • whether the impact of the act is irreversible
    • whether the act has led to an increased reliance on the employer covenant
    • whether the act has led to an increased likelihood of compensation being payable by the Pension Protection Fund
    • whether the act has impacted or delayed our investigation
    • whether the act has resulted in expiry of statutory deadline for us to take enforcement action
    • whether the act may pose a significant or systemic risk to our statutory objectives
    • whether the act may undermine public confidence in pensions
22. As with the assessment of culpability, the degree of harm will be relevant to the banding of a person’s penalty, rather than simply the number of features of harm applicable on the facts. For example, where the act meant the trustee was misled as to the facts they needed to properly represent the interest of members before a transaction (which is irreversible) took place, this is likely to be viewed as causing high harm.

Step 2: Placement within the band: aggravating and mitigating factors

23. The degree of culpability and harm will determine which band the penalty falls in. The starting point for the amount of any penalty will be the middle of the band (so £50,000 for Band R, £0.25million for Band HF1, £0.45million for Band HF2, and £0.7million for Band HF3). We may then adjust the placement within the band up or down to take account of relevant aggravating and/or mitigating factors.
24. Example factors relevant to these specific penalties include:
    
    • evidence of dishonesty, lack of integrity, fraud and/or deliberate concealment of the act (aggravating)
    • receipt of benefit or some other incentive as a result of the breach/act (aggravating)
    • little or no attempt to remedy the breach (aggravating)
    • evidence of multiple breaches of law (aggravating)
    • whether the reason for acting as they did was to conceal other breaches (aggravating)
    • whether the reason for acting as they did was to prevent our intervention, investigation or enforcement (aggravating)
    • evidence of persistent/repeated breach (aggravating)
    • extent of cooperation with us following the breach (aggravating or mitigating)
    • evidence of suitable mitigation being provided to the scheme where appropriate (mitigating)

    And for penalties relating to failure to comply with the Notifiable Events regime:

    • whether we had advanced notice of the event from the target by other means (mitigating)

    And for penalties relating to providing false/misleading information:

    • whether we were notified proactively and promptly once the target identified the issue (mitigating)
25. The above list may include some factors that are integral features of certain penalties. In such cases, the presence of the aggravating factor is already reflected in the rationale for the penalty and/or the assessment of degree of culpability and harm when determining the band level. As a result, it would not be used as justification for increasing the penalty further.
26. The list is not intended to be comprehensive. Our assessment will consider any factor that is relevant, including any that may provide some mitigation for the person’s actions but may not reasonably excuse the conduct. The factors are not listed in any particular order of priority.

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