Supplementary memorandum submitted by
the Pensions Regulator
KEY FACTS AND FIGURES FOR THE PERIOD APRIL
2005 TO FEBRUARY 2006
We have been developing a suite of performance
measures going forward and these will be set out in our business
plan for 2006-07 due to be published in April.
In the last year we have been establishing the
team structures and business processes needed to deliver the Regulator's
statutory objectives. All of the key regulatory processes are
now in place, but in the early part of the year some parts of
the business continued to operate legacy Opra systems.
Nevertheless, we have been able to maintain
management information covering our main regulatory and business
activities and the key figures are set out below.
We will of course be publishing information
on our activities and performance in 2005-06 in our annual report
which will be laid before parliament later this year.
1. CUSTOMER SUPPORT
ACTIVITY
Telephone calls (through the main public switchboard—to
end of February 2006):
Calls abandoned 4% (against 5% service standard)
Telephone calls in TPR to date are running at
an average 800 per week (160 per day).
The biggest proportions of phone calls are general
enquiries (46%) or enquiries concerning scheme returns (25%).
Since April 2005 our customer support team have
also answered approximately 3,600 emails, letters and faxes.
2. SCHEME RETURNS
The scheme return collects key information about
pension schemes that enables us to maintain an accurate picture
of the pensions landscape and provides some of the information
we need to assess risks to members' benefits. It also provides
information used by the Pension Protection Fund for their modeling
of the risk-based levy.
We have prioritised collection of information
about defined benefit schemes because of the importance of scheme
funding and PPF levy calculation. At the end of February we had
issued 9,300 returns and received 7,749. During 2006-07 as well
as issuing the second year returns for DB schemes we will be issuing
returns to defined contribution schemes and the remaining small
PPF-eligible schemes.
Our understanding of our business requirements
has developed during the year and it is now clear that the range
of information we need to obtain directly from schemes is less
than first thought, and for some types of information there are
alternative sources. The next version of the scheme return will
be considerably shorter than the earlier version (maximum 27 pages
instead of 54 pages), and will be web-based allowing pre-population
of some answers and online validation of data. Web forms will
also direct schemes to complete only the relevant pages for their
scheme type, which will mean in practice that many will have to
fill in less than 15 pages. This should speed up the process and
also significantly reduce the burden on schemes in replying as
well as improving the quality of data collected. We are also expecting
a unit processing cost reduction (for the Regulator) from £45
to less than £15.
3. LEVY INVOICES
During 2005-06 a new levy collection system
has been implemented to address the greater range and value of
levies compared with those formerly collected by Opra. Eligibility
for levies and the amount of any liability is assessed by the
Regulator using bespoke software. Despatch of invoices and collection
of receipts is carried out by HBS Limited under contract to the
Regulator. Collection initially focused on PPF eligible schemes
because of the much higher values of PPF Initial Levy. Following
clarification of PPF data requirements and improvement of overall
data quality levels throughout the year, invoicing has now been
fully automated and we expect to have completed this process by
the end of the financial year (to 31 March 2006).
Levies due in 2005-06 are approx £185 million
(this includes the PPF initial levy of £140 million). Levies
collected at the end of February total approximately £146
million. We anticipate collecting over 90% of all levies due (by
value) by the end of the financial year.
4. TRUSTEES
Appointments by the Regulator: (as at end of Feb)
Sixty five independent trustees (from the trustee
register) have been appointed to funds with a total value of approx
£1 billion. These appointments are made where we believe
the scheme trustees do not have the necessary skills, for example
where a scheme wind-up needs to be progressed, or the scheme may
need to go through the PPF assessment period.
520 other trustee appointments have been made,
in order for members, or their representatives, to release their
benefits, where there are no longer any trustees able to administer
the scheme.
Trustee appointments are made by staff where
the matter is not contentious. For example, where the scheme has
no trustees in place, a trustee is appointed "to secure the
proper administration of the scheme". If the matter is contentious,
appointments are made by the determinations panel.
Trustee Register
The Pensions Regulator's role includes compiling
and maintaining a trustee register. We will generally refer to
the register when deciding upon appointments made under section
7 of the Pensions Act 1995, and we must appoint from the panel
when exercising our discretion to appoint under section 23 (when
there is an insolvency event and there are no independent trustees).
There were 51 trustees on the register (40 corporate
and 11 individual) at the end of February 2006.
5. DETERMINATIONS
MADE BY
THE DETERMINATION
PANEL
A determination is a decision to exercise a
regulatory power. Some determinations can be made by the Regulator's
staff, but the legislation requires certain powers to be exercised
by the determinations panel.
Between April 2005 and February 2006, the panel
has made eight determinations. Three concerned cash equivalent
transfer values [schemes requesting extensions of the time limit
for paying a transfer], four were trustee appointments, and one
was to remove a trustee.
6. PROGRESS WITH
CODES OF
PRACTICE (AS
AT END
FEBRUARY)
A schedule showing the status of the 12 codes
of practice is attached.
three codes are now in force
three have been laid before parliament
five are scheduled for laying over the next
few months
one is not proceeding (this has been announced
by DWP)
7. SCHEME WIND
UPS
Requirements affecting the winding up of occupational
pension schemes were introduced on 1 April 2002. The requirements
in the Pensions Act (and to a lesser extent the Pension Schemes
Act) are modified and extended by sections 47 to 50 of the Child
Support, Pensions and Social Security Act and the Winding Up Notices
Regulations. These requirements are intended to speed up the winding
up procedure.
Introduction has been phased. Schemes that went
into wind-up between 1 April 2002 and 31 March 2003 have a year
to report after the date at which they will have been in wind-up
for three years. From 2007, all schemes will be due to report
in the three months following the date that they have been in
wind-up for three years.
TPR has recently implemented a new pilot approach
to wind ups. From the latest set of scheme returns we have identified
a number of schemes that have not wound up after four years and
we are piloting a new approach with these schemes to ensure that
they both put in place a robust project plan to conclude wind
up as quickly as possible and also that the level of fees they
are charging is reasonable. The initial pilot involves around
130 cases and if it proves successful can be expanded to a wider
population.
The quality of record keeping during the life
of a pension scheme as well as during the winding up process is
a key factor in relation to the time taken to complete scheme
wind-ups.
8. CORPORATE
TRANSACTIONS—CLEARANCE
ACTIVITY
Guidance on the clearance process was published
in April 2005. In the 11 months to the end of February there have
been 125 determinations:
Other activity (to mid January):
27 letters of comfort were issued (confirming
that an event was not of a kind that triggered under our clearance
guidance, and/or did not require withdrawal approval).
17 clearance applications were withdrawn.
9. MULTI-EMPLOYER
SCHEMES
Guidance on our approach to multi-employer withdrawal
applications was published in November 2005. We have received
41 multi-employer withdrawal applications.
10. NOTIFIABLE
EVENTS
Since April 2005 we have received 391 Notifiable
Events (an average of 35/36 per month).
11. SCHEME SPECIFIC
FUNDING
We continue to build the team that will deal
with scheme specific funding cases, with a target to expand the
team to 39 staff by the end of June, but work flows will dictate
the pace of growth.
We have met with a number of trustees, companies,
actuaries and advisers including several representing the largest
and most publicised deficits. All contacts thus far have been
made prior to the trustees and the employer reaching agreement
on the funding proposals. The number of cases opened is 74 and
this continues to grow almost daily. The rate of growth will increase,
and the intention is to make contact this year with the FTSE 100
companies and the larger schemes with valuations due pre-December
2006. We also expect that trustees and employers will wish to
speak to us early on in the process of Scheme Specific Valuations.
12. OTHER REGULATORY
ACTIVITY
Regulation of scheme administration and governance:
we have approximately 300 active cases (in addition to trustee
appointments). These are a combination of scheme returns, whistleblown
reports and notifiable events, and concern issues such as MFR
funding, scheme administration problems, and wind-up impasses
(see section 7 above).
DEVELOPMENT SCHEDULE FOR THE CODES OF PRACTICE
[Information last updated 17 March
2006]
Code of
Practice
|
Summary of scope | Code
available on web
| Expected date for laying code before Parliament
| Planned
date for
issue of
code
| Date
legislation comes into
force
|
Code 1
Reporting breaches of the law
| Reporting by statutory "whistleblowers" of certain breaches of the law which affect pension schemes to the Pensions Regulator. (From April 2005 the requirement is extended to include trustees and their advisers and service providers, managers of schemes not set up under trust, and employers sponsoring or participating in work based pension schemes.)
| Yes | In force | Issued
6 April 2005
| 6 April 2005 |
Code 2
Notifiable events | Notifying the Pensions Regulator of prescribed events which occur in respect of pension schemes, and in respect of employers who sponsor pension schemes.
| Yes | In force | Issued
30 June 2005
| 6 April 2005 |
Code 3
Funding defined
benefits
| Implementation of the funding arrangements that apply to most private sector occupational pension schemes that provide defined benefits.
| Yes | In force | Issued
15 February
2006
| 30 December
2005 |
Reporting late payment of contributions to occupational money purchase schemes
Draft
| Trustees or managers of occupational money purchase schemes to report late payments to the Pensions Regulator in certain circumstances.
| Yes | Code laid
2 March 2006
| May 2006 | April 2006 |
Reporting late payment of contribution to personal pension schemes
Draft
| Managers of personal pension schemes to report late payments to the Pensions Regulator in certain circumstances.
| Yes | Code laid
2 March 2006
| May 2006 | April 2006 |
Member nominated trustees and directors
Draft
| Implementation of arrangements to ensure that at least one-third of the trustees or trustee directors are member-nominated. Definition of reasonable period within which specified steps must be taken.
| April 2006 | April 2006 |
June 2006 | April 2006 |
Trustee knowledge and understanding
Draft
| Trustees of relevant schemes to have an appropriate body of knowledge and understanding of the law relating to pensions and trusts and the principles relating to the funding of occupational pension schemes and investment of scheme assets.
| Yes—not
yet laid | March 2006
| May 2006 | April 2006 |
Reasonable
periods for the purposes of the Occupational Pensions Schemes (Disclosure of Information) Regulations 2006
Draft
| What constitutes a "reasonable" period where mentioned in the Disclosure Regulations.
| Subject to
finalisation of
Regulations
| Subject to
finalisation of
Regulations
| October 2006 | October 2006 |
| Dispute resolution—reasonable periods |
Trustees or managers to decide on matters in dispute within a reasonable period and to notify the applicant of their decision within a reasonable period.
| N/A | N/A | Not
proceeding
| Legislation will
not now require
a code of
practice on
Dispute
resolution
Link to DWP
announcement
|
Early leavers
—reasonable periods
Draft
| Trustees or managers duty to provide members who leave schemes after a short period of membership with a statement of their entitlements. Definition of reasonable period within which specified steps must be taken.
| Yes | Code laid
14 March 2006
| May 2006 | April 2006 |
Modification of subsisting rights
Draft
| Exercise of new power to make limited modifications to subsisting rights to benefits under occupational pension schemes whilst protecting the accrued rights of members.
| April 2006 | April 2006 |
June 2006 | April 2006 |
Internal controls
Draft | Implementation of the requirement for trustees and managers to have adequate internal controls to ensure that an occupational scheme is administered and managed correctly.
| April 2006 | April 2006 |
June 2006 | December 2005 |
| |
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