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Pensions Monitor

BHS

At the time of writing, a report on the pre-sale audit of BHS is set to be published after the High Court refused to gag the Financial Reporting Council (FRC) despite an application from Sir Philip Green.

The report will provide commentary on the accounts that were presented to Dominic Chappell, who bought the company for £1 just after the report was signed off by PwC. The company collapsed just over a year later, with a buyout deficit estimated at nearly £600 million. Interestingly, PwC was adviser to BHS on its pension schemes for fourteen years until 2013.

The High Court ruling comes shortly after the FRC enforced its highest ever penalty, £10 million, against the collapsed company’s auditor, PwC, while its senior partner, Steve Denison, who was responsible for the report, was given a 15-year ban from auditing work and personally fined £500,000.

A FRC spokesperson said it will “consider the detailed judgment” when the report becomes available. The Work and Pensions Committee said it will write to the Insolvency Service so that it reopens its investigation of former BHS directors. The report is the latest in a line of sanctions or financial demands on the former BHS owners.

£1 million fines to protect DB schemes?

The Department for Work and Pensions (DWP) has proposed that the government could impose civil fines of up to £1 million, as well as criminal sanctions on those deemed to be failing their DB scheme.

In its consultation, “Protecting defined benefit pension schemes – a stronger Pensions Regulator” it laid out plans for those involved with such schemes, with higher sanctions for the worse offences to strengthen The Pensions Regulator’s authority (you will be aware that the Regulator has faced increased scrutiny recently, particularly following the collapse of Carillion and BHS).

The consultation, aimed at all parties involved with DB schemes, hopes to deliver a more proactive Regulator and be able to obtain scheme information from the sponsor at the right time to “get redress for members if things go wrong”.

The Regulator has already said that it hopes the sanctions will be a strong deterrent.

Whilst there have been claims in the industry that the Regulator already has the necessary powers to act but maybe lacked the appetite to, most have welcomed the new “early warning” proposals as a positive step towards safeguarding DB schemes.

Under the proposals, the Regulator could impose a civil fine of up to £50,000 or disqualify the director, if a scheme fails to set the statutory funding objective, appoint a chair of trustees or produce a chair’s statement on funding. This fine could increase if schemes fail to disclose a wide range of events and could enforce criminal sanctions if schemes fail to give the right information at the right time.

The Regulator could issue Carillion directors with a big bill

The Regulator is considering enforcing its powers against the Carillion directors, forcing them to pay into the collapsed pension schemes.

In a letter to the Work and Pensions Committee, the Regulator’s CEO, Lesley Titcomb, said that it would investigate the issue of a contribution notice against individuals who would then be required to pay cash into the schemes or to the Pension Protection Fund (PPF).

The Regulator opened an investigation into Carillion’s directors shortly afterward Carillion collapsed in mid-January 2018. There are other organisations also involved in conducting their own investigations which will be used by the Regulator to aid its decision.

The Committee chair Frank Field welcomed the news although questioned the timing. He urged the Regulator to step up to the plate and act as it has so long intimated it would.

The scale of the “problem” is huge. There have been suggestions that as little under £13 million could be paid across whilst records show that Carillion’s six main directors received nearly £17 million in the ten years leading to the collapse. This could be deemed little recompense, given that the PPF has been landed with a record-breaking bill of £800 million following taking on the schemes.

Cold calling “left out in the cold”

The government has confirmed the ban on pensions cold-calling will now be delayed until at least the Autumn despite the promise of tackling pension scammers being almost two years old.

Whilst the Financial Guidance and Claims Bill which introduced provisions for the ban on cold-calling received Royal Assent in May 2018, final regulations enabling the ban are still to be put before parliament.

A spokesman has been quoted as saying “…following debates in parliament, and having considered evidence from the industry, we will launch a short consultation on the draft legislation to ensure it is as effective and robust as possible. We intend to lay the required regulations before parliament this Autumn.”

A long-term campaigner against cold-calling, Baroness Ros Altmann said, “it is extremely disappointing to see that even this will not happen on time”, after her having worked hard to try to get a ban on cold calling into the Bill. The sentiment was echoed by her predecessor Minister of State for Pensions, Sir Steve Webb.

The pensions dashboard – delayed?

You may not be surprised to read that there are increasing concerns that the pensions dashboard has fallen behind schedule and may not be ready by the original April 2019 launch date as was originally stated (or even scrapped altogether as at the date of going to print).

The Department for Work and Pensions (DWP), took over responsibility for the project from the Treasury last October and is still to publish its feasibility study. Initially the study had been due by the end of March 2018, then by the end of spring and now the DWP says it will come out “in due course”.

Whilst (most of) the UK appreciates that topics such as Brexit are taking up most of the government’s time, there has been work going on behind closed doors to keep this on track.

In mid-June, Origo, a Financial Technology company and supporter of the dashboard, announced that it has successfully tested the dashboard technology to accommodate 15 million users, demonstrating the IT infrastructure is able to cope with such high volume. Their testing was certainly in-depth, given that they tested a throughput of just over 2,000 transactions per second to deal with incoming traffic from the dashboard and the responses from the pension providers.

A delay may not be too bad though, given that many are stressing that it would be better to delay the launch to make sure it is done correctly. Compulsion has been talked about although as the concern is that without compelling all providers to feed into the dashboard, it would not have full coverage, giving the end-user a bad experience if they cannot see all their benefits when they log in.

Despite this, the industry is ploughing ahead and continues to aid the development with many, including the Pensions Administration Standards Association chairwoman, Margaret Snowdon expecting a dashboard being ready for use in 2019. Origo’s managing director Anthony Rafferty expects most providers will not wait to be compelled and will be happy to provide input and support without legislation.

We say the sooner the better as the dashboard is set to revolutionise the financial services industry by enabling savers to view all their pension details in place and assist individuals plan better for retirement.

 

David Deidun, Partner at Quantum

david.deidun@quantumadvisory.co.uk