Our approach for negotiation and concluding settlements of our regulatory or civil enforcement action.
Published: 25 March 2021
Who this is for
Introduction
In exercising our functions and carrying out our statutory objectives we seek to use our resources efficiently and proportionately, taking account of the PACTT principles.This may involve the timely settlement of potential or ongoing enforcement action.
For the purposes of this policy, we define settlement as where the target of potential or ongoing enforcement action offers something in return for The Pensions Regulator (TPR) agreeing not to pursue or continue the action. It does not include situations where we decide not to pursue or continue with regulatory or civil proceedings we have brought.
Any agreements to settle can:
- bring an end to TPR’s enforcement action more quickly than would otherwise be the case and enable us to communicate the outcome to the regulated community and the wider public
- achieve a positive outcome for the scheme(s) and for members without the need for costly and lengthy legal proceedings
- save time and resources (for TPR, the subject(s) of enforcement action and other directly affected parties)
A target of our enforcement action may wish to discuss the resolution of proposed or ongoing enforcement action with us in settlement discussions. In most of our enforcement cases we have a wide discretion whether or not to take part in settlement discussions and, where an agreement in principle can be reached, to conclude or facilitate a binding settlement agreement.
In exercising our discretion we will consider all relevant factors, including:
- our statutory objectives
- the terms of this or any other relevant policy, guidance or other materials we have issued
- the facts and circumstances of the case
- our public law duties
This policy sets out the approach that the enforcement team at TPR will generally take to settling proposed or ongoing enforcement action, including civil proceedings in courts and tribunals. We may choose to depart from it if we consider it appropriate to do so.
This approach will not apply to:
- the penalty amount (where the monetary penalties policy applies)
- applications (eg clearance, regulated apportionment arrangements, master trust authorisation and other third party applications)
- the specified period following issue of a Financial Support Direction within which reasonable financial support should be put in place
- criminal proceedings
- judicial review proceedings
- enforcement of employer duties under the Pensions Act 2008
The decision whether to settle ultimately rests with TPR.
This policy should be read in conjunction with the Case Team Procedure and the Determinations Panel Procedure.
Objectives for settlement
Our high-level aim for any settlement is that it should offer a fair and appropriate outcome having regard to the circumstances of the case and our statutory objectives. Each case will offer its own unique challenges and circumstances, so an acceptable settlement for one case may be very different from that for another, even if the same regulatory power is being used.
Examples of settlement might include an acceptable cash sum in a contribution notice case or an undertaking not to act as a trustee in a prohibition case. It may also include an outcome which is different from one that could be secured through legal proceedings.
Some other examples of settlement options include:
- change to the sponsoring employer(s) to the scheme
- section 75[1] guarantees from entities in the wider group
- shares in related companies or other assets
- dividend sharing arrangement
- security over assets, contingent assets, cash in escrow
- the transfer of members to an alternative scheme
General Principles
We will balance any proposed settlement outcome against what we might achieve by pursuing or continuing enforcement action, including the risk of prolonged periods of legal challenge in the tribunals/courts, and the costs, delay and uncertainty this can bring.
When deciding whether or not to settle we must have due regard to relevant factors, including legal advice on the chances of success before the Determinations Panel or tribunals/courts, and the views of relevant stakeholders, eg trustees or the Pension Protection Fund (PPF).
We will make our decision taking all relevant factors of an individual case into account. In many of our cases this is likely to include most or all of the factors in the table below. Please note that these factors are not listed in order of importance or priority:
| Factor | Our approach |
|---|---|
| Protection of member benefits | We will consider the position of the members following the proposed settlement against the position that might be achieved following enforcement action. |
| Protection of the PPF | We will consider the position of the PPF following the proposed settlement against the position that might be achieved following enforcement action. |
| Position of relevant affected parties | We will consider the position of relevant affected parties (eg trustee or scheme employer) in particular where the proposed settlement will require them to act or to enter into an agreement with any other party |
| The nature and strength of our case | In considering a proposal for settlement we will consider what we believe might be achieved if we took, or continued with, enforcement action |
| The possible duration and costs of regulatory action | A case may take years to reach a conclusion, especially if subject to appeal. We take the view that it is not in any stakeholder’s interests to engage in protracted enforcement action when a more immediate and appropriate solution is available. |
| The ongoing sustainability of the solution | Where the target presents a solution involving an ongoing scheme, we would expect that proposal to demonstrate that this is viable and sustainable in the long term. |
| Long term impact of the proposal | We will examine the long-term impact of a settlement proposal and its effect on our statutory objectives. |
| Behavioural change | The outcome should aim to change behaviour, increase compliance and deter repetition among the wider regulated community. |
Settlement discussions
Settlement discussions with TPR can take place at any time during the enforcement process. We are willing to consider settlement of a case at any point during an investigation and subsequent proceedings, from our initial engagement up to the time that a decision is issued by the Determinations Panel, or by the relevant tribunal, or civil or appeals court.
Settlement discussions can be started by any party to the enforcement action, including TPR, and can be held face to face or in writing. Only settlement discussions involving TPR can be expected to resolve our enforcement action. These discussions will normally be conducted on a Without Prejudice basis, which means they will remain confidential and will not be used in the ongoing proceedings.
Those settlement discussions will typically take place between us and the target of our enforcement action, although in some instances we may take the view that other interested or affected parties should also be involved. This is so that we can take their views into account (and they may also need to take action as part of the settlement proposed). Where the target declines to include other parties we have identified, we will consider their position but reserve the right not to take the settlement discussions any further.
If it becomes apparent during any settlement discussion or negotiation that a party is acting in bad faith (such as using the discussions as a tactic to deter or delay enforcement action) or is guilty of serious misconduct, we reserve the right to terminate the discussion with immediate effect.
Settlement offers
The target must provide us with details of their offer and proposed settlement terms in writing, together with any relevant documentation. For us to be able to properly understand and assess the merits of a settlement proposal, we expect it to be sufficiently detailed and may need to be supported with evidence and analysis. When considering settlement offers, we will consider whether any of the illustrative factors listed in the table above apply, along with any other relevant factors.
We will consider formal offers of settlement in accordance with the general principles set out above, in particular whether they offer an appropriate outcome for the benefit of those protected by our statutory objectives. We may also indicate what we would consider acceptable for us to take no further action.
While we are open to considering settlement offers and are willing to enter into or continue negotiations, this does not mean we will suspend or delay the enforcement process – we will usually continue the investigation and/or proceedings in parallel with the settlement discussions.
Engaging external stakeholders
In some cases, it may be appropriate for us to engage with other interested or affected parties and external stakeholders before we agree a settlement. This could include (but is not limited to):
- the scheme trustees
- the scheme employer
- the PPF
- other targets (in cases of multiple targets) or affected parties
- other agencies, eg the Financial Conduct Authority, HMRC, the Insolvency Service, Charity Commission
The views of these stakeholders may be relevant factors which we take into account when reaching a decision about settlement, and the settlement may mean they have to take action as a result.
Decisions on settlement
The decision on whether to accept or reject a settlement offer rests with TPR, although the terms of settlement may also require the agreement of other parties – eg if it requires a change to the trust deed and rules of the pension scheme in question. The decision not to bring, cease or continue enforcement or other regulatory action rests with TPR alone.
After settlement is agreed
Once settlement terms are agreed in principle they must be set out in writing. Where some or all of the settlement terms are to be performed in the future, confirmation that we will cease our enforcement action may depend on some or all of those settlement terms being completed. In those circumstances, we will usually only confirm our enforcement action has ceased once the relevant settlement terms have been completed.
If the settlement terms are not performed in the manner or by the date specified, ordinarily we will no longer be bound by any agreement reached to cease or not pursue enforcement action.
Consequences of settlement
The effect of settlement on any proposed or ongoing enforcement action will depend on the terms agreed with the target in each case, in respect of the power(s) under consideration but there will often be common features as set out below.
Before warning notice is issued
We will confirm that we will not pursue the proposed enforcement action against the target.
After warning notice is issued but before referral to the Determinations Panel
We will confirm that we have ceased enforcement action against the target.
After referral to the Determinations Panel but before determination
We will write to the Determinations Panel to confirm that the request for determination(s) against the target is withdrawn and will confirm to the target that we have ceased enforcement action against it.
After determination but subject to a referral to the First Tier Tribunal, Upper Tribunal or on appeal from a final decision of the Tribunal
The terms of settlement will usually include steps to bring the tribunal reference to an end or to notify the appeal court of the settlement under the rules of the relevant tribunal or court.
Civil proceedings before a claim form is issued
We will confirm that no claim form will be issued against the target.
Civil proceedings after a claim form has been issued but before a judgment is given
The terms of settlement will usually involve the proceedings coming to an end through securing the court’s approval of a consent order (which might take the form of a Tomlin order[2]) under the applicable rules.
Civil proceedings after judgment but subject to an appeal
The terms of settlement will usually involve the proceedings coming to an end through securing the court’s approval of a consent order (which might take the form of a Tomlin order) under the applicable rules.
Ordinarily, providing the above confirmations or actions will not restrict us in our use of any other powers, or in relation to the powers being settled, if information comes to light that we are not aware of at the time or that the targets have not disclosed to us or where there is subsequently a material change of circumstances.
Multiple powers under consideration
Where we are considering using or are pursuing use of more than one power, we may choose to reach a settlement in respect of some but not all of these powers. In this instance, the steps set out in ‘Consequences of settlement’ (above) will apply only to the powers subject to the agreed settlement - the enforcement action in relation to the other powers will continue.
Multiple targets
Where more than one target is subject to proposed or ongoing enforcement action, we may choose to reach settlement in respect of some but not all of them. In this instance, the steps set out in ‘Consequences of settlement’ (above) will apply only to the parties subject to the agreed settlement – and ordinarily the proposed or ongoing enforcement action against the other targets will continue.
Publication
Under section 89 of the Pensions Act 2004 we may publish a report containing the details of the investigation and settlement reached. Our policy is not to fetter our discretion to publish information about the use, or consideration given to the use, of our powers, under section 89.
Read more about our case publication policy and regulatory intervention reports.
Footnotes for this section
- [1] The reference made here is to section 75 of the Pensions Act 1995 and the statutory debt owed by the employer to the trustees of the scheme, which becomes payable in circumstances defined by the legislation. These include when the employer suffers an insolvency event, or the scheme is wound up. Section 75 requires the scheme actuary to estimate the amount needed to secure the scheme's liabilities with annuities bought from a regulated insurance company.
- [2] A Tomlin Order is a type of Consent Order where the parties have agreed that some step, action or activity will be completed in the future (the terms of which are included in a schedule to the order). With the consent of the court, it adjourns the proceedings generally but will allow a party to apply to the court for permission to enforce the terms of the settlement in the event of any failure by a party to perform the terms set out in the schedule to the order.