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Letting
it all hang out Telling tales has always been a risky business, as the infamous likes of ex-MI5 agent David Shayler and “Spycatcher” Peter Wright discovered. No one likes a sneak, even if they are willing to pay millions for their memoires. But what’s a person to do in an age of increasing transparency, where disclosure of company affairs is not only encouraged, but often mandatory? What about those thorny legal and ethical issues of business confidentiality? Whistleblowers have been protected since The Public Interest Disclosure Act was made law in July 1999. But are you biting the hand that feeds you by reporting breaches of practice, even if it is part of your job? The Occupational Pensions Regulatory Authority (Opra) was established in 1997, its primary aim to raise awareness of and ensure compliance with the 1995 Pensions Act. Initially
understanding of non-compliant schemes which had to cope with new
responsibilities, Opra is now coming down like a ton of bricks on
those whose interpretation of the Act leaves something to be desired.
Richard Murphy, a partner with Lane Clark & Peacock explains: “Usually,
when a breach has happened, it’s quite obvious and the thing to
do is report it to Opra, even if you’re in the pay of the company,”
he says. “It’s always worse when it comes out later, so I think
people, at least in the bigger schemes, have got used to the idea
that Opra understands mistakes happen, and that if you report it
and show what you’ve done to fix it, they’re very sympathetic. What
seems to annoy them is if they think you’re not taking the issue
seriously,” The most frequently reported breaches of the Act by trustees are late payments of employee/er contributions, with reports of late preparation of audits and MFR valuations by auditors and actuaries the most frequent in their respective categories. Murphy remembers how, pre-1997, if the employee in charge of payroll went on holiday and payment of contributions was delayed, no suspicions were raised, “whereas now people have got into the routine where they have to get it (timely payment) done, and that’s a positive thing.” Penalties for non-compliance range from warning letters to criminal sanctions, although very few offences now merit the latter charge. These include employer-related investments, acting as a trustee while disqualified, and deliberately withholding information from Opra, all described by Joe Robertson, a regulatory director with Opra as ‘anorak’-type offences, “because you have to know the offence exists to work out that it’s wrong.” Most breaches fall under the “civil” banner, and Opra has the authority to impose fines which are proportionate to the severity of the offence. As initial resistance to change following the Act gave way to compliance, so Opra raised the stakes. Since October 2001, Opra has published on its website the names of companies and trustees who have been found in breach of the Pensions Act (www.opra.gov.uk). Robertson cites the reasons for this unprecedented transparency: the impending Freedom of Information Act, demand from scheme members to know their scheme is being properly run, and reassurance for members that previously anonymous postings of scheme breaches did not refer to their own. He expects the move to increase members’ interest in their scheme and improve trustee practice, but believes it will take at least six months to see if the practice commonly known as “naming and shaming” has any discernible effect on the number of breaches being reported. “Once this is seen as the norm, people will expect it to continue,” he says, “but the offenders, those who have been found guilty, will never be completely comfortable because they will think their case was different.” Michael Dunn certainly thinks his case is different. As financial controller of Pegasus Security Group, he has recently taken over management of the company’s pension scheme, and was dismayed to find Opra’s determination (that the trustees or scheme managers were guilty of not appointing an auditor or scheme actuary during a certain time period in 2000) displayed on the website. “I don’t think it’s fair at all,” he says. “People who’ve seen it on the website aren’t going to know all the details, they’ve already been asking questions about it.” Dunn attributes the breach to problems during a company buy-in dating back a few years, and that the existing trustees could not have been expected to deal with it. However, Pegasus accepted the guilty plea (“I think it was a matter of having to”), and Dunn is now fielding enquiries about the scheme. Nevertheless, even if he does feel hard done by, Dunn accepts that the publicity would definitely act as a deterrent against future breaches of the Act: “If somebody realises they’re going to get their name plastered wherever, it’s going to make them tighten up and do the job correctly in the first place,” he says. Responses to Opra’s move from less directly-involved parties have been varied. At the 2001 ICAEW (Institute of Chartered Accountants of England and Wales) pensions conference, KPMG director Teresa Sienkiewicz described the naming and shaming as “a salutory lesson providing a proverbial kick up the backside for clients failing to get their accounts in on time,” whereas Watson Wyatt partner Helen James has mixed feelings. She says if there was a genuine mistake committed, pasting the details of the offence on Opra’s website might “have the effect that members of the scheme thought it was a scheme not worth belonging to. And if it was only that they’d overlooked something that had been put right, it seems a bit draconian,” she says. Whistleblowing has become part of working life for many people: the FSA is to set up its own telephone line and email address for employees who feel unable to air their concerns through internal procedures; there is an organisation called Public Concern at Work which offers advice to individuals as well as their employers and informs on all aspects of whistleblowing legislation (see www.pcaw.co.uk). Until now, whistleblowing on occupational pension schemes has been the preserve of those directly responsible – trustees, actuaries and auditors – who, once they are familiar with Opra’s requirements, have tended to follow reporting procedures. But with increased member scrutiny as a result of simplified documents and online access to determinations, it will be interesting to see whether employees start making more noise about the running of their schemes. But Helen James warns that increased pension awareness should not pit members against their trustees: “If a member wants to be a member-nominated trustee because he [sic] thinks he can do it better, that’s all the better, and if a member takes more interest in his pension scheme then that’s all to the good as well. But he should try and align himself with the trustees, not against them,” she says. There’s safety in numbers, as they say, and if the increased disclosure is to achieve its goal of raising standards, it will be all the more convincing coming from a united front. - Pensions Age December 2001 -
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