The Pensions Regulator has issued its first ever fines under S10 of the Pensions Act, fining four trustees of the pension scheme of an international airline for failing to get accounts audited on time for two years in a row.
The trustees, of the Pakistan International Airlines Retirement and Death Benefits schemes, have been fined £500 each, having missed deadlines in both 2015 and 2016 without reasonable excuse.
Trustees or scheme managers of most pension schemes are legally required to obtain audited accounts and an auditor’s statement about contributions every year.
TPR’s Determinations Panel, which found that the trustees had treated their obligations as a “low priority”, even after the scheme’s actuary highlighted the problem to TPR in a breach of law report in November 2016.
The Determinations Panel agreed that the trustees had “ample time” to redress the breaches and did not give a reasonable excuse for the failures.
TPR executive director of frontline regulation Nicola Parish says: “We will take action if we believe members’ benefits are at risk from failures in a scheme’s governance and administration. Obtaining audited annual scheme accounts is a statutory requirement and a fundamental aspect of good governance.
“Failure to obtain audited accounts can hinder a scheme’s ability to obtain a valuation and can also be an indication of wider governance failings.
“This case, and the first use of our section 10 power to enforce against breaches of this nature, is in line with our clearer, quicker and tougher approach. We will make full use of the powers available to us.”
Pakistan International Airlines – How TPR took action
On 23 November 2016 the scheme actuary submitted a breach of law report to TPR, notifying the regulator that the trustees had not obtained audited reports or an auditor’s statement about contributions for the scheme years ending 5 April 2015 and 5 April 2016. Regulations require them to be obtained within seven months of the end of the scheme year.
After attempting to engage with the trustee board, on 30 August 2017 a warning notice was issued to the trustees outlining TPR’s intention to pursue penalties under section 10 of the Pensions Act 1995. The warning notice invited representations from the directly affected parties and indicated that the matter would not be referred to the Determinations Panel if the breach was rectified within two weeks.
Although copies of the 2015 accounts were received, the 2016 accounts remained outstanding without reasonable excuse until after the determination notice was issued. As a result TPR referred the matter to the Determinations Panel recommending a penalty of £500 per trustee.
The Determinations Panel imposed a fine of £500 per trustee, in line with the approach set out in TPR’s monetary penalty.