The Pensions Regulator (tPR) has set out a new policy on its approach to settling regulatory or civil enforcement action. It does not include anything unexpected but is helpful clarification of tPR’s expectations. Previously, the factors tPR would take into account when considering settlement were not published.

For Trustees and employers involved in regulatory proceedings reviewing the Policy will be essential, but parties not involved in regulatory proceedings may wish to have regard to the Policy if involved in a transaction that is potentially relevant to tPR’s powers.

What does the policy say?

tPR has a wide discretion to settle enforcement proceedings. This helps it to conclude matters more quickly, to allow communication to the wider public, and to avoid lengthy proceedings (saving time and resources for all parties).

tPR will look for a fair and proportionate outcome having regard to the specific facts of the case. The Policy stresses that cases will be considered on an individual basis (so cases involving the same powers will not necessarily result in a similar settlement) and that tPR has discretion to depart from the Policy.

The factors tPR will usually take into account when considering settlement include:

  • The protection of members’ benefits;
  • The protection of the PPF;
  • The position of relevant stakeholders;
  • The nature and strength of tPR’s case;
  • The possible duration and costs of regulatory action;
  • The ongoing sustainability of the solution;
  • The long-term impact of any proposal;
  • Whether the outcome will drive behavioural change in the industry.

What does the policy mean?

Most legal disputes end in settlement rather than being decided by a Court. The same is true of tPR’s enforcement actions.

We welcome tPR’s confirmation including that it is willing to consider settlement of a case at any point in a matter. Our experience is that complex enforcement cases can last years and that often settlement can produce appropriate outcomes for members and other stakeholders. The Policy should help encourage quicker and more effective settlement solutions.

It is clear that tPR has wide scope to consider settlements and is not bound by solutions that might be secured through legal proceedings. In each matter tPR will weigh up a number of competing factors including the prospects of succeeding in its case, the interests of scheme members and the PPF. The ultimate decision on whether and on what terms to settle lies with tPR and not any other affected party.

The release of the Policy coincides with the recent passing of the Pension Schemes Act 2021, which grants tPR stronger enforcement powers. Although the Policy does not apply to criminal proceedings (nor does it apply to other areas, such as applications to tPR for clearance) potential Targets under tPR’s new powers may wish to bear in mind tPR’s approach to settling cases. It is of note that tPR will consider more holistic factors to settlements such as sustainability of a proposed solution, the long-term impact of a proposal and drivers for behavioural change.

Finally, in any settlement of enforcement action, both tPR and its Targets will want to ensure any formal agreement covers various necessary elements including the precise effect of the settlement, requirements for the settlement to take effect, liability allocation, confidentiality and disclosure, timings and costs, amongst other matters.