Enforcement action from The Pension Regulator has seen £3.5m paid into a defined benefit (DB) pension scheme, after restructuring activity and debt write-offs put assets beyond the reach of the scheme when its sponsoring employer went into administration.

The regulator confirmed that it had reached the settlement after issuing a warning notice seeking financial support directions against six target companies in relation to the Newburgh Engineering Co Ltd Pension and Assurance Scheme.

This action was based on evidence that assets had been transferred out of a scheme employer, Newburgh Engineering Co Ltd (NEC), to its wider corporate group, with these transfers, which were part of a series of corporate restructurings, placing assets out of reach of NEC’s creditors, including the pension scheme.

TPR argued that, had the funds been made available by the employer to the scheme’s trustees, it is possible that a buyout of the scheme’s liabilities could have been secured with an insurer.

However, NEC went into administration in October 2018, meaning it was unable to support the DB pension scheme.

To protect the interests of the scheme’s savers, TPR therefore facilitated a multi-stakeholder global settlement resulting in £3.52m being paid to the pension scheme, which has now transferred to the Pension Protection Fund (PPF).

The regulator also clarified that while the settlement was less than the section 75 debt of £8.84m it represented all the targets’ cash assets and about 80 per cent of their estimated available assets.

TPR interim executive director of frontline regulation, Mel Charles, stated: “Our actions in this case send a clear message that TPR will investigate corporate transactions and restructurings which affect schemes of all sizes.

“Where proper mitigations have not been considered for pension schemes, our anti-avoidance powers may be engaged.

“We will consider reasonable settlement offers which help us to meet our statutory objectives of acting in the interests of scheme members and the PPF, while saving considerable costs and resource for all parties involved.”

News of the settlement was shared alongside the regulator’s compliance and enforcement bulletin, which revealed that a slight increase in the use of most of the regulator’s auto-enrolment powers during the six months to December 2023.

However, this was in line with TPR’s expectations, given the continuing large wave of small and micro employers who were due to meet their re-enrolment responsibilities in this period.

In particular, TPR issued 29,489 compliance notices, up from 25,106 in the previous period, 17,451 unpaid contribution notices, compared to 15,994 in the previous period, and 19,538 fixed penalty notices, up from 17,178.

In addition to this, it issued 8,400 escalating penalty notices, up from 7,944 in the previous period.

For the first time the bulletin included a breakdown of TPR’s AE enforcement data by local authority area, showing in more detail where in the UK penalty fines have been issued since 2012, as well as in 2023.

Whilst AE enforcement activity had increased, TPR's frontline regulation (FLR) powers showed a moderate decrease, with 193 statutory powers used in the period between July and December 2023, down from 263 in the previous six-month period.

Indeed, TPR said that it has seen an overall improvement in compliance with FLR duties, including chair’s statement and scheme return requirements, which is reflected in a continued reduction in the number of fines issued.

Interim Joint Director of Automatic Enrolment, Catherine Nicholson, said: “While the vast majority of employers are complying with their AE duties, this bulletin demonstrates the enforcement action we take, where necessary, to protect savers.

“Our compliance and enforcement activity is largely data and intelligence-driven. Publishing the data broken down by regions and local authority areas helps show that we target employers who fail to comply across the entire UK.

“Moreover, wherever in the UK we detect serious non-compliance, our inspection teams will investigate on the ground and use our powers. In just the last six months we have inspected employers on their premises throughout Scotland, England, Wales and Northern Ireland."

“Our decision to publish information driving our enforcement activity helps ensure we are transparent about the use of our powers, and can also help inform and educate those we regulate about our decisions and actions and therefore serve as a deterrent.”

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