Action by The Pensions Regulator (TPR) using its anti-avoidance powers has seen £3.5 million being paid into a defined benefit pension (DB) scheme, after restructuring activity and debt write-offs put assets beyond the reach of the scheme when its sponsoring employer went into administration.
Published today (Wednesday), a new regulatory intervention report sets out how a settlement was reached after TPR issued a warning notice seeking financial support directions against six target companies in relation to the Newburgh Engineering Co Ltd Pension and Assurance Scheme.
The report comes as TPR publishes its Compliance and Enforcement Bulletin, which demonstrates the robust action it has taken to protect savers between July and December 2023.
The regulatory intervention report details how TPR's action was based on evidence that assets had been transferred out of a scheme employer, Newburgh Engineering Co Ltd (NEC), to its wider corporate group. These transfers, part of a series of corporate restructurings, placed assets out of reach of NEC’s creditors, including the Newburgh Engineering Co Ltd Pension and Assurance Scheme.
Had the funds been made available by the employer to the scheme’s trustees, it is possible that a buyout of the scheme’s liabilities could have been secured with an insurer.
NEC went into administration in October 2018, meaning it was unable to support the DB pension scheme.
To protect the interests of the scheme’s savers, TPR facilitated a multi-stakeholder global settlement resulting in £3.52 million being paid to the pension scheme, which has now transferred to the Pension Protection Fund.
While the settlement was less than the section 75 debt of £8.84 million it represented all the targets’ cash assets and about 80% of their estimated available assets.
Mel Charles, TPR’s Interim Executive Director of Frontline Regulation, said: “Our actions in this case send a clear message that TPR will investigate corporate transactions and restructurings which affect schemes of all sizes.
“Where proper mitigations have not been considered for pension schemes, our anti-avoidance powers may be engaged.
“We will consider reasonable settlement offers which help us to meet our statutory objectives of acting in the interests of scheme members and the PPF, while saving considerable costs and resource for all parties involved.”
Use of AE Powers remains robust
TPR’s latest Compliance and Enforcement Bulletin shows how it used its wider frontline regulation and automatic enrolment (AE) powers to protect savers in the six months to December 2023.
For the first time the bulletin includes a breakdown of TPR’s AE enforcement data by local authority area. Building on the regional breakdown we first published in the last bulletin, it shows in more detail where in the UK penalty fines have been issued since 2012, as well as in 2023.
The latest bulletin shows that in respect of its automatic enrolment powers, TPR issued:
- 29,489 Compliance Notices compared to 25,106 in the previous period
- 17,451 Unpaid Contribution Notices compared to 15,994 in the previous period
- 19,538 Fixed Penalty Notices compared to 17,178 in the previous period
- 8,400 Escalating Penalty Notices (EPN) compared to 7,944 in the previous period
There has been a slight increase in the use of most of our AE powers during the six months to December 2023. This is in line with TPR’s expectations, given the continuing large wave of small and micro employers who were due to meet their re-enrolment responsibilities in this period.
We target non-compliance no matter where in the UK
Interim Joint Director of Automatic Enrolment, Catherine Nicholson, said: “While the vast majority of employers are complying with their AE duties, this bulletin demonstrates the enforcement action we take, where necessary, to protect savers.
“Our compliance and enforcement activity is largely data and intelligence-driven. Publishing the data broken down by regions and local authority areas helps show that we target employers who fail to comply across the entire UK.
“Moreover, wherever in the UK we detect serious non-compliance, our inspection teams will investigate on the ground and use our powers. In just the last six months we have inspected employers on their premises throughout Scotland, England, Wales and Northern Ireland."
“Our decision to publish information driving our enforcement activity helps ensure we are transparent about the use of our powers, and can also help inform and educate those we regulate about our decisions and actions and therefore serve as a deterrent.”
In respect of the use of TPR’s frontline regulation (FLR) powers, the total number of statutory powers used in the period between July and December 2023 was 193 compared to 263 in the previous six-month period.
This represents a moderate decrease in our use of FLR powers, which is within expectations and largely consistent with broader patterns in recent years.
We continue to see an overall improvement in compliance with FLR duties, including chair’s statement and scheme return requirements, which is reflected in a continued reduction in the number of fines issued.
Notes for editors
- Newburgh Engineering Co Ltd Pension and Assurance Scheme is a small defined benefit pension scheme with about 100 members. The scheme had a funding deficit of £2.32 million as at the last valuation on 31 March 2014, prior to the employer’s insolvency.
- Newburgh Engineering Co Ltd (NEC), and the six targets of the warning notice, are part of the IMS Group – a corporate group now solely owned by the Isaac Middleton Settlement (IMS) Trust – a discretionary family trust established in April 1955 to make provision for the descendants of Isaac Middleton.
- NEC entered into administration in October 2018. Shortly after the administration, there was a pre-pack sale of its business and assets to a connected entity, Nuclear Energy Components Limited, controlled by Vince Middleton.
- A debt due to the Scheme triggered under Section 75 of the Pensions Act 1995 when the employer suffers an insolvency event at a time when the Scheme is in deficit.
- The targets of our regulatory action were:
- Newburgh Holdings Limited
- Hope Valley Industrial Limited
- Hope Valley Residential Limited
- Hope Valley Industrial Holdings Limited
- Hope Valley Residential Holdings Limited
- Hope Valley Holdings Limited
- The compliance and enforcement bulletin is published every six months to evidence the compliance and enforcement interventions TPR has undertaken to protect savers.
- This update provides information about our cases and the powers we have used. It is designed to help employers, their advisers, trustees and administrators understand the type of interventions we undertake.
- Our regional and local breakdowns of AE enforcement data shows in more detail where in the UK penalty fines have been issued since 2012, as well as in 2023. The local breakdown is based on ONS local authority area classifications and is not related to specific local authority bodies.
- In the previous period (Jan to June 2023) the total number of frontline regulation statutory powers used was 263 compared to 215 in the previous six-month period (July to December 2022).
- TPR is the regulator of workplace trust-based pension schemes in the UK. Our statutory objectives are to:
- protect members’ benefits 
- reduce the risk of calls on the Pension Protection Fund
- promote, and to improve understanding of, the good administration of work-based pension schemes
- maximise employer compliance with automatic enrolment duties
- minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only)
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