The Pensions Regulator (TPR) has fined the London Borough of Barnet £1,000 for failing to submit pension scheme information on time – the first such regulatory action against a public sector fund.
The £906.3m fund failed to submit its 2016 scheme return, which ensures the regulator has up to date information about a scheme’s membership and funding position, as well as contact information for the individuals responsible for the scheme.
Nicola Parish, TPR’s executive director of frontline regulation, said: “It is the legal responsibility of trustees and managers to submit a scheme return by the deadline. This is one of the most basic regulatory requirements for trustees and managers and it is vitally important that we have up-to-date information about schemes so we can carry out our role effectively.
“We are also concerned if it is not submitted, as this may signal further problems within the administration of the scheme. Good scheme governance is a key factor to achieving positive outcomes for members. The action we took in this case demonstrates our commitment to this.
“We have shown that where managers and trustees are failing with their basic duties, including in large public service schemes such as this one, we will use our powers to intervene.”
TPR issued a formal notice to Barnet Council in July last year, requesting the scheme return be filed by 12 August 2016. Barnet failed to comply and also failed to respond to subsequent communications.
TPR said it was “continuing to engage with local authority staff” regarding the scheme’s governance and administration.
A spokesman for Barnet Council said: “The council recognises that this is totally unacceptable. Due to a specific resourcing issue, the 2016 annual scheme return was not filed in time by our supplier. The fine has been paid by them and steps taken to ensure this will not reoccur.”
The Barnet scheme has one of the poorest funding positions of the 89 local government pension schemes in England and Wales: it was 57.7% funded at the end of March 2016 according to its most recent annual report. The unfunded deficit was £665.6m.
Pension freedoms withdrawals hit record high
UK individuals withdrew nearly £1.9bn from their defined contribution pension funds in the second quarter of 2017, according to statistics from HM Revenue & Customs (HMRC).
The UK tax authority’s data showed 200,000 people used their right to take their pension savings as cash between April and June.
Since April 2015 UK pension savers have been granted more flexibility regarding what they can do with their money at retirement after the government removed the requirement to buy an annuity.
HMRC said £3.5bn was withdrawn in the first half of the year, and £5.7bn during the whole of 2016.
In a review of the post-retirement market published earlier this month, the Financial Conduct Authority reported that consumers accessing defined contribution pension pots early had become “the new norm”, with most opting for lump sumps rather than regular income.
Over half of pots accessed were fully withdrawn, but of these, over half (52%) were moved into other savings and investment products, partly due to a lack of trust in pensions, the regulator said.
It warned that this could result in bad outcomes for consumers, as they could pay too much tax, miss out on investment growth or lose out on other benefits.
Stephen Lowe, group communications director at post-retirement product provider Just, said: “We still lack evidence to know whether this level of withdrawal is healthy or should be worrying.
“The FCA’s research found many people who thought they were doing the right thing by taking pension money had a ‘penny drop’ moment and questioned their decision when confronted with facts about life expectancy and the size of fund needed to deliver even a basic retirement income.”
Engineering firm shuts DB scheme
Engineering company GKN has closed its UK defined benefit pension scheme to existing members.
The £2.3bn scheme was closed to future accrual effective July 1, according to the company’s half-year results statement.
The group has also agreed a one-off contribution of £250m to be paid into the scheme in the second half of the year in an effort to plug a funding shortfall. This will be funded from the proceeds of a bond issued earlier this year.
The company said it expected to “reduce slightly” its annual deficit payments, currently £42m, following a formal valuation.