The Financial Conduct Authority (FCA) is applying emergency asset retention rules from 27 April 2022 to stop financial advisers, who advised members of the British Steel Pension Scheme (BSPS) to transfer out of the scheme, from disposing of assets that might otherwise be used to pay compensation to those who were badly advised. Under the rules, firms to which it applies will have to report to the FCA as to whether they can afford the potential costs of redress to BSPS members and will have to comply with assets restriction rules until they have confirmed that they have sufficient resources to pay their potential redress bill. The FCA may also consult on extending the asset retention until affected firms have paid all compensation owed.
The action follows a consultation launched on 31 March 2022 and closing on 30 June under which the FCA published proposals for a compensation scheme for former members of the BSPS who received unsuitable advice to transfer out of the fund – the FCA has found that the advice in almost half (46%) of 365 files examined covering 89 firms was unsuitable.
The Pensions Regulator has brought a prosecution against two fraudsters who have been jailed for a combined total of more than 10 years for their roles in a scam that saw over 200 savers tricked into transferring £13.7m into fraudulent schemes. Alan Barratt and Susan Dalton were sentenced after admitting charges of fraud by abuse of position arising from their roles as trustees of pension schemes. They were also banned from acting as company directors for eight years following a request by TPR. TPR had brought a civil trial at the High Court in 2018 against Barratt, Dalton and others, which took place at the High Court in 2018 after which Barratt, with another party – David Austin, was ordered to repay c.£7.7 million and Dalton and Austin were required to repay another c.£5.9 million. Following the end of the trial TPR began a criminal investigation.
The pair passed the majority of the transferred savings to David Austin who co-ordinated the scam and used the funds for his own personal benefit, to fund his businesses, to pay others involved in the pension liberation operation and enrich himself. Independent trustees appointed by TPR have discovered that it was very unlikely that any pension funds would be restored for scheme members. Austin was part of TPR’s investigation into the allegations but died in 2019, before it was completed.
In a separate case, a former owner of Norton Motorcycles has been given a suspended prison sentence for illegally investing the company’s pension schemes’ money into his business. As the sole trustee of the three DC pension schemes which invested in Norton Motorcycles, Stuart Garner was sentenced to eight months imprisonment, suspended for two years, for each of three counts of breaching employer-related investment (ERI) rules. He was also disqualified from acting as a company director for three years and ordered to pay TPR’s costs. The defendant pleaded guilty to three charges of breaching ERI rules last month admitting to having invested most of the money of each scheme into his business, Norton Motorcycle Holdings Ltd. The independent trustee is working to recoup the funds.
The House of Lords will begin the third and final reading of the Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill on Wednesday 27 April. Provided there are no amendments, the Bill is still expected to receive Royal Assent – the deadline for this is the prorogation of Parliament expected to be the following day! Once Royal Assent has been bestowed, the DWP will be able to launch the consultation on regulations that will explain how the employer consent and contingent survivor pensions aspects of GMP conversion will work in future. Our March headlines covered the challenges faced by this Bill in more detail as did the February headlines.
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HMRC has clarified the tax treatment of interest on arrears in discussions with industry bodies and has agreed to those bodies publishing HMRC’s view. Please see “GMP Equalisation projects: interest on arrears payment of pension – income tax treatment” published by the Association of Consulting Actuaries. As implied by the link, this issue was raised in the context of GMP equalisation projects. Tax on arrears should be calculated consistently with the tax treatment of interest on the late payment of pension instalments. HMRC has confirmed that it is unlikely that income tax should be deducted before payment (other than for overseas members). Members will be pleased that the interest element should be covered by the Personal Savings Allowance.
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The Pension Protection Fund (PPF) has published its Strategic Plan (“Strong Foundations Safer Futures”) for the next three years. This indicates that the PPF intends to conduct a full review of its levy calculation methodology, with a view to making simplifications. It also states that it intends to ensure that its data is dashboard-ready, despite both the PPF and Financial Assistance Scheme currently being out of scope.
The Plan identifies five priorities:
