The Pensions Regulator has admitted to issuing a section 231 warning notice to an unnamed pension scheme, the first time it has used this power.

Section 231 gives the regulator the right to impose a contribution schedule on an employer for its pension scheme if it is not happy with the schedule agreed between the employer and the trustee.

Speaking at the PLSA Annual Conference in Manchester, 20 October, The Pensions Regulator chief executive Lesley Titcomb said the regulator has particular concerns if they think a scheme is not being treated fairly in comparison to other stakeholders, such as prioritising dividend payments over deficit repair contributions.

“We are becoming tougher, we are intervening more quickly, earlier in the process, and we’re using some of our powers for the first time…I can confirm that we have issued a warning notice in respect of a section 231 case. It will not surprise you to know that I’m not going to say anymore than that about it, other than that it demonstrates that we can and will intervene if we see a scheme being treated unfairly, and we have potential cases in the pipeline.

“Section 231 cases are complex and the power must in the end be exercised by our determinations panel, a group of people separate from the investigation, so we have to persuade them that it is the right thing to do. They’re then open to being challenged further in the upper tribunal and possibly beyond that. So the warning notice is only the first step in the process, and at any point of course is the possibility that the targets decide to come and offer us a settlement. If that is good enough then it may be appropriate for us to settle the case at that point and not proceed.”

Talking more generally about DB schemes she stressed the regulator believes that the majority of schemes are supported by employers that can support the deficits and the majority of members will receive full pension benefits. However, she admitted that deficits have increased in recent years and some employers do struggle to make deficit contributions.

“We believe that many schemes should do more to tackle their deficit and reduce the risk to their members and to the PPF. We acknowledge that there are many demands on employer cash, when I talk about affordable, that is of course the regulator’s perspective on affordable, a narrow definition. Affordable means different things to employers and other stakeholders.

“There is an entirely separate debate to be had as to whether it is in the long run desirable, fair, for example between generations, to pay big sums into DB schemes on an ongoing basis, but as the regulator we think that if employers can pay into their schemes to repair deficits, then they should pay into their schemes.”

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