The Pensions Regulator (TPR) has shared guidance reminding trustees and employers of the restrictions on using pension scheme funds for employer-related investments (ERI) and the risk of criminal prosecution.

In the guidance, TPR confirmed that, aside from certain exceptions, no more than 5 per cent of the current market value of pension scheme assets may, at any time, be invested in ERI, and no assets may be loaned to the employer.

It also stressed that breaches of these rules constitute a criminal offence, highlighting a number of recent examples where trustees have been prosecuted by TPR, including TPR’s case against the former owner of Norton Motorcycles, Stuart Garner, and the prosecution of two former pension scheme trustees in November.

The guidance also explained that trustees, employers and scheme advisers must report ERI breaches to TPR, as well as include details of any ERI (whether permitted or in breach) in the scheme’s annual report, together with details of how and when any breach will be remedied.

TPR director of enforcement, Erica Carroll, stated: “Trustees should be in no doubt that where we see savers’ funds being illegally invested, we will take firm action, which could result in a prison term.

“To continue to educate trustees about their ERI duties, our new guidance clearly sets out the restrictions and the responsibilities that apply and so I urge all those involved in running pension schemes to read it, understand it and apply it.”

Trustees who breach ERI restrictions can be fined up to £5,000 for individual trustees or £50,000 (for corporate trustees), or imprisonment, or both.

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