New Internationalist Publications Limited v The Pensions Regulator

The appeal is dismissed. The Penalty Notice (“PN”) for £12,500 issued on 29 October 2024 is confirmed. The reference is remitted to the Respondent. REASONS

1. The Appellant referred the amount of the penalty imposed in the PN to the Tribunal under Regulation 32(1)(b) of the Occupational Pension Schemes (Charges and Governance) Regulations 2015 (“the Charges and Governance Regulations”).

2. The Respondent was established as the UK regulator of workplace pension schemes by the Pensions Act 2004 (“ the 2004 Act ”). The Respondent’s objectives under section 5 of the 2004 Act include the protecting the benefits of scheme members and promoting and improving the understanding of good scheme administration.

3. The PN was issued for a failure by the Appellant, as trustee of the Scheme, to comply with the requirement for trustees of specified schemes to complete a detailed value for members (“DVFM”) assessment annually. The requirement for specified schemes to complete a DVFM assessment is in regulation 25(1)(b) and regulation 25(1A) of the Occupational Pension Schemes (Scheme Administration) Regulations 1996 (“the Regulations”). A request was sent for further information to the Appellant on 8 April 2024 and a response received from the Finance Manager, which confirmed that the trustee had failed to carry out a DVFM assessment at intervals of no more than one year as required in the Regulations and did not provide any evidence that the Scheme is exempt from the requirement to complete that assessment.

4. The Appellant has referred the PN to the Tribunal pursuant to Regulation 32 of the Charges and Governance Regulations.

5. The Tribunal found that the Appellant requested a review of the PN and the outcome of the review was issued to the Appellant on 18 December 2024. Grounds of Appeal

6. The Appellant accepts that there were grounds for the Respondent to issue a PN but the amount of the penalty is excessive. The Appellant seeks a reduction of the penalty.

7. The penalty is disproportionate to the size of the company and the size of the scheme which has a pot of £132,000. The penalty will have a large impact on the financial stability of the business, which is a small, not-for-profit company with 12 full time equivalent employees and a turnover of £1,087,407. Also, as at 31 March 2024, there were only 6 members of the scheme and the total pension savings of the 6 members was less than £100,000.

8. For some kind of breaches the Respondent levies lower fines for smaller businesses so this penalty seems unfair.

9. The Appellant never intended to breach any rules or regulations.

10. The Appellant acted promptly to the emails from the Respondent dated 8 and 18 April 2024.

11. The Appellant kept in regular contact with the Respondent since becoming fully aware of the failure to meet its obligations.

12. The Appellant is a publisher and media professional and not an expert in pension regulation.

13. The Appellant appointed a professional pension adviser to run the scheme on 26 June 2024.

14. There was some confusion about the number of directors of the Appellant and the Appellant was previously exempt from the relevant scheme. Grounds of Opposition

15. The maximum potential penalty could have been £50,000. The penalty imposed was considerably less than this.

16. The Respondent applied the principles of the Monetary Penalties Policy (“MPP”) which set out how the Respondent will use its powers to impose monetary penalties under the pensions legislation. The appropriate band for a failure to undertake a DVFM assessment was determined to be Band 2, i.e. £0-£25,000 for a corporate entity.

17. The Respondent applied the reduction which took into account that there were fewer than 5 members: a reduction in the starting point to £12,500. As the number of members had already been taken into account there are no grounds for a further reduction.

18. The Respondent took into account that the Appellant is liable for the penalty which will not be paid from scheme assets. This means that the membership will not suffer from the imposition of a penalty.

19. The Respondent took a fair approach notwithstanding that the Respondent has concerns that it did not react particularly promptly.

20. The role of trustee is a fiduciary one. The responsibility of managing the funds that will provide for other people’s security in retirement is not to be underestimated and should be taken extremely seriously by those in such a position of trust. This was a complete, rather than a partial failure to comply with the annual DVFM assessment requirement for the relevant scheme year ending in 2023.

21. The penalty of £12,500 was fair and proportionate and should be upheld. Conclusions

22. The Tribunal found as findings of fact the agreed facts as set out in the Agreed Statement of Facts and Issues.

23. On the basis of those findings the Tribunal found that there were ground to issue the PN. This is not in dispute.

24. The Tribunal found that the level of penalty was fair and reasonable and within the range permitted by the legislation.

25. The Tribunal found that 31 October 2023 was the deadline for completing and publishing the DVFM assessment for the Scheme year ending 31 March 2023. The Appellant failed to comply with this legal obligation.

26. The Appellant took no steps to comply with its legal obligations or remedy the breach until the Respondent wrote in April 2024.

27. The Tribunal found that there was a duty on the directors of the Appellant as trustee directors of the Scheme to comply with those obligations and inform themselves of those obligations and the requirements of the legislation. The Respondent published guidance and support for trustees in respect of the DVFM assessment on 23 September 2021. This guidance set out in straightforward language the different elements that comprise the DVFM assessment and examples of how to comply.

28. The Tribunal found that the Appellant took legal advice and emailed the Respondent on 17 June 2024 and stated that advice had been received that no exceptions applied to the Appellant and the Appellant should have completed a chair statement and DVFM assessment.

29. The Appellant was not aware that a DVFM assessment was required until November 2023. Ignorance of the legal obligations is not a ground to reduce the penalty.

30. The Appellant was aware that there was no expertise within the company and relied on previous pensions advisors on pension related matters.

31. The Tribunal found that the Respondent had regard to the MPP when deciding on the level of penalty to be imposed. In particular, the Respondent took into account the following factors: a) The likelihood that and/or the extent to which a breach may have a detrimental impact on members (including the number of members affected). b) The likelihood that and/or the extent to which a breach may impact the Respondent’s ability to carry out regulatory activities effectively. c) The likelihood that and/or extent to which a breach may pose a significant or systemic risk to the Respondent’s statutory objectives. d) The likelihood that and/or extent to which a breach may undermine public confidence in pensions.

32. The breach relates to the scheme year end of 31 March 2023. By the time the Respondent contacted the Appellant in April there had been a substantial period of non-compliance. No DVFM assessment was carried out before the PN was issued. It was over a year before the Appellant took the necessary steps to comply with the requirements. There was a significant period of time of when the Appellant was unaware of its obligations to complete a DVFM assessment and took no steps to seek legal advice until contacted by the Respondent.

33. This length of time of the breach is properly reflected in the level of penalty.

34. The tribunal found that the Appellant did not act promptly as asserted.

35. The Appellant submitted that as a small, not-for-profit company with 12 full time equivalent employees and a turnover of £1,087,407 the fine is disproportionate to the size of the company but also the size of the scheme which has a pot of £132,000. The penalty will have a large impact on the financial stability of the business.

36. The Tribunal is not persuaded by the Appellant’s submission on the basis of the evidence available. In any event no amount may be paid out of the assets of an occupational pension scheme for the purpose of reimbursing, or providing for the reimbursement of, any trustee of the scheme in respect of a penalty.

37. The Appellant submitted that there was no intention to breach any rules or regulations. This is of no assistance to the Appellant as the Appellant’s intentions are not relevant. The directors of the trustee company are required to have understanding and knowledge of the law relating to pensions and trusts to a degree which is appropriate for the purposes of enabling the individual properly to exercise the function as a trustee director.

38. The tribunal found that the level of PN was fair and reasonable and within the range permitted by the legislation. Accordingly, the appeal is dismissed.