Guest comment: TPR and DB investigations

With the impending Pension Schemes Bill, employers and corporate groups but also directors, advisers and even trustees have understandably been focusing on the new criminal offences. But should they also be looking at whether The Pensions Regulator’s (TPR's) new and proposed information gathering powers may be the part of the new toolkit with the most practical impact?

TPR has already said that it will increasingly use its powers to demand information rather than ask for it to be given voluntarily. It will now also be able to call people for interview to answer questions on any subject relevant to its functions. Those receiving these formal requests will not be able to refuse attending or answering questions because of duties of confidentiality, other than legal privilege.

Interviewees will no longer be able to refuse to answer questions which might incriminate them – a potentially sensitive point given how broadly the new criminal offences around risking scheme benefits and avoiding employer debts are currently framed. TPR cannot use compelled statements to base its case for criminal charges or civil penalties against the person who it compelled them from, but there are limits to this safeguard. For example, TPR can still use compelled statements in moral hazard cases, and it can use information or documents given to it “voluntarily” when it is not using its formal powers.

Many businesses will be aware of the risks and disruption from dawn raids in other spheres, such as competition law. TPR already has the power to enter premises without a warrant (at a “reasonable time”) and will be able to do this as part of moral hazard investigations under the new legislation.

These new search powers will allow TPR to cast the net much wider than before - including buyers of a company, lenders and even those involved with former employers. It will also be able to search premises where documents relating to the business are kept, not just documents relating to the pension scheme.

It will, however, remain the case that TPR will not be able to enter and search a personal home (that isn’t used for business purposes) without a court warrant.

TPR has been given a new power, to be used in the prevention or detection of crime only, to obtain the metadata of communications - the who, when, where and how – but not the content of communications. So these provisions don’t amount to what may commonly be thought of as ‘wiretapping’ such as listening in on calls or reading emails.

It therefore remains to be seen when and how TPR might use these powers, but the investigation of routine funding and covenant issues does not seem to be the likely target.

As we have seen with other regulators, businesses should expect the possibility that TPR will consider its civil and criminal powers in tandem – on the one hand to prosecute (and deter) criminal behaviour under the new laws, on the other hand to ensure that schemes are appropriately funded to protect benefits.

Those involved in running pension schemes will be concerned about the inevitable disruption that any regulatory investigation may cause. However, as TPR has indicated that it expects to use these powers more frequently in the future, it is a disruption which companies, trustees and their service providers will need to get used to.

As with all regulatory investigations, prompt and, where possible, collaborative engagement with TPR will be the order of the day and help to avoid escalation of powers and more formal and intrusive action. However, it will be important to take legal advice on how best to approach an investigation as there are traps for the unwary – particularly in relation to complying with existing confidentiality obligations, and keeping in mind the risk of statements being used in a criminal case.

Other regulators with similar investigation powers have faced challenges to the way they use them. TPR’s existing powers have held up robustly so far. The industry will need to wait and see how TPR will use its new expanded toolkit, particularly against employers and trustees, and where any limits may be found.

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