The government has published its response to its consultation on extending The Pensions Regulator’s (TPR) Contribution Notice (CN) and information gathering powers.

The Pensions Schemes Act 2021 introduced the ‘employer resources test’, which will work alongside the existing regime to assess whether an act or failure to act has occurred for a Contribution Notice to be issued.

The government sought views on its proposed regulations as to what constitutes the resources of the employer, and on a suggested process to identify, calculate and verify the value of employer resources for the purposes of the employer resource test.

It also outlined the draft regulations around TPR’s information gathering power changes, including on what information interview notices should contain, modifications to how inspection powers may be utilised in multi-employer schemes, and setting out the fixed or escalating penalty rates for non-compliance with information gathering requests.

In its response, the government acknowledged that some respondents believed that measuring the resources of an employer by profit before tax (PBT) was too narrow and a more holistic approach would be preferable.

Furthermore, “about half” of the respondents suggested using earnings before interest tax deprecation and amortisation as the measure for the employer resources test, as it provides a better view of cash available to support the scheme.

However, the government has confirmed that it will be sticking with PBT as the measure, as believes PBT “gives the most appropriate picture of net profits available” to support a defined benefit (DB) scheme.

It noted that TPR will be able to decide which of the tests, either the employer insolvency test or employer resources test, satisfies the ‘act’ elements of the CN regime in each situation.

“The employer resources test, as with other jurisdiction tests within the wider CN regime, is one of the elements of the CN regime which must be met and is not sufficient on its own for a CN to be issued,” the government continued.

“The statutory test for reasonableness – which must be satisfied before a CN can be imposed, obliges TPR to take account of all relevant factors which may include a broader assessment of the employer’s strength.

“We believe that the CN regime as a whole should provide comfort to those concerned that TPR will not be taking a holistic view.”

It noted that, as its CN power has been in place for more than 15 years, there “may be a role” for a single TPR document to pull together its experience of using the powers, and to set out its views and expectations.

The draft regulations will be clarified to ensure they can apply to charities and non-profits, and will also be updated to reflect feedback around verification.

TPR will produce policy guidance on how and when they will use their information gathering powers, including how they will use their powers to investigate criminal offences.

However, the government decided against including an additional requirement in draft regulation for the notice to explain the implications of section 310 (admissibility of evidence).

“Our expectation is that TPR’s policy guidance will have due regard to appropriate current guidance and procedures for vulnerable parties or witnesses and will cover reasonable adjustments that can be made to how TPR provides such vulnerable persons with information, how they communicate with TPR or any requirements that may affect their ability to attend an interview,” it stated.

TPR is also looking at updating its policies around escalating penalties as part of a wider piece of work to refresh and align their broader suite of operational policies, including aligning to changes brought about by the Pension Schemes Act 2021.

In the ministerial forward, Pensions Minister, Guy Opperman, said: “Provisions in the act give TPR stronger powers to deal with the small number of circumstances where employers decide to evade their obligations.

“This document provides our response to the consultation on draft regulations made under the powers in the act, relating to Contribution Notices and information gathering powers.

“We will consult on planned changes to the notifiable events framework and the introduction of notices and statements later this year.

“Once complete, this wider package of regulations accompanied by TPR’s associated codes of practice represents the final step in this journey in meeting our manifesto commitments in providing TPR with new and improved powers so that it can intervene more effectively to protect members’ hard earned retirement savings.”

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