TPR issues £2m contribution notice to overseas company

The Pensions Regulator (TPR) has issued a £2m contribution notice (CN) to an overseas parent company to help protect a 600-member defined benefit (DB) scheme, while its use of enforcement powers during H2 2021 remained “broadly steady".

In its regulatory intervention report, TPR confirmed that it used its anti-avoidance powers against SMT Scharf AG in support of the scheme for the employees of the Dosco Group, a UK-based engineering business.

SMT Scharf AG sold the Dosco Group to a management buyout in 2013, which TPR argued had “no realistic prospect of being able to support the business”, with the scheme’s sponsoring employers entering administration just eight months after the sale.

However, TPR’s intervention led to a CN against the former parent company for just over £2m, and settlement of around £130,000 with former chief executive of the Dosco Group, Martin Cain.

The regulator initially issued warning notices against both Scharf and Cain in March 2019, negotiating the £130,000 settlement with Cain in December 2020, which reflected the benefit he received under the consulting agreement.

However, whilst Cain's case was withdrawn from the determinations panel, TPR pressed ahead with the case against Scharf, which, despite requesting an oral hearing, did not attend the hearing before the panel in February 2021.

The panel subsequently issued a CN against Scharf for £2,082,382.86, made up of a principal sum of £1,412,113.77 and an additional sum of £670,269.09 for lost investment returns and interest, with a further £114.10 daily interest, subject to a maximum total sum of £2,317,278.70.

TPR executive director of frontline regulation, Nicola Parish, highlighted the case as a "clear warning to corporate entities and individuals that TPR will take action where appropriate to protect schemes regardless of their size".

"It also shows that the fact a target is based overseas is no obstacle to the use of our anti avoidance powers," she continued.

“Scharf showed a complete disregard for the scheme which was left with no funding or prospect of financial support. We put savers at the heart of all we do and we take an extremely dim view when their interests are deliberately neglected in this way.”

Alongside the regulatory report, TPR has published the latest Compliance and enforcement bulletin, revealing that its use of powers, including in relation to automatic enrolment, had remained "broadly steady".

In total, TPR issued 20,555 compliance notices in H2 2021, compared to 35,087 in H1 2021, 17,284 fixed penalty notices, down from 22,542, and 6,988 penalty notices, down from 7,407.

The number of unpaid contribution notices increased slightly, meanwhile, rising from 11,921 to 13,376.

The regulator also confirmed that the total number of statutory powers used in respect of its frontline regulation powers was 244, compared to 286 in the previous period.

However, TPR explained that the reduction in the use of some powers represents a reduction in the number of employers due to complete their re-enrolment responsibilities in the previous six-month period.

Commenting on these figures, director of auto-enrolment, Mel Charles, said: “Despite the challenges of the past two years since the start of the pandemic, our indications are that employers have continued to do the right thing for their staff.

"However, we are not complacent, and we continue to keep a close eye on compliance, targeting our resources where they are most needed in line with our risk-based approach.”

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