19. Mr A complains HMRC and TPR decided to suppress publication of a determination notice in April 2010 despite both having knowledge of criminal and/or fraudulent activity in the pension scheme.
HMRC and the determination notice
20. Our ‘Principles of Good Complaint Handling’ say organisations should provide honest, evidence-based explanations for handling complaints. They also say decisions should be proportionate, appropriate and fair.
21. Throughout its correspondence with Mr A and during its correspondence with us, HMRC has maintained it holds no responsibility for the determination notice’s suppression. Although its criminal investigation of the scheme may have been the trigger for TPR to issue the determination notices in 2010 and 2011, it says at no stage did it ask or instruct TPR to suppress them until after it had completed its investigations.
22. TPR’s final response, dated 4 March 2020, says it decided to suppress the notice so as not to affect HMRC’s ongoing criminal investigation. We are satisfied TPR, not HMRC, made the decision to delay the publication of the determination notice.
23. From the evidence we have seen, while TPR cited HMRC’s criminal investigation as its justification for delaying publication, there is no evidence HMRC directly requested or orchestrated the delay in publishing the notice. With that in mind, we cannot hold HMRC responsible for a decision that was made by an entirely unrelated organisation and in which it had no say.
24. We believe HMRC acted in line with our ‘Principles of Good Complaint Handling’ in not addressing these concerns.
TPR and the determination notice
25. Our ‘Principles of Good Administration’ say that to get it right, organisations should act according to their statutory powers and duties. They also set out that organisations should have regard to the relevant legislation in their decision-making.
26. TPR’s role is the protection of work-based pensions in the UK. As part of its regulatory and enforcement activities, it publishes information online about its decisions.
27. The 2004 Act sets out how TPR should handle determination notices. Section 89 of the 2004 Act covers the publishing of reports and says:
‘(1) The Regulator may, if it considers it appropriate to do so in any particular case, publish a report…in relation to that case and the results of that consideration.
(2) The publication of a report under subsection (1) may be in such form and manner as the Regulator considers appropriate’.
28. This gives TPR discretion and means it can publish a report at any time if it considers it appropriate to do so or, in turn, delay publication where it deems a delay to be necessary.
29. Our ‘Principles of Good Administration’ set out how public organisations should exercise their discretion in decision-making. They say public bodies should have regard to the relevant legislation, take account of all relevant considerations and balance the evidence appropriately. They also set out that when taking decisions, public bodies should behave reasonably and make sure the measures taken are proportionate to the objectives pursued, appropriate in the circumstances and fair to the individuals concerned.
30. At the conclusion of HMRC’s investigation, [limited company] was found to have committed a criminal offence that, in turn, resulted in criminal proceedings for the individuals involved. Once TPR was aware of the investigation’s conclusion, it published the determination notice for [limited company] on its website. These findings set out that [limited company] was guilty of dishonesty offences and it was prohibited from serving as trustee on any scheme in the future.
31. TPR has argued its justification for delaying the publication of the determination notice was to make sure HMRC’s criminal investigation and any subsequent court proceedings were not prejudiced. It explained it is a risk-based regulator and acts based on an ‘assessment of the risks to achieving [its] statutory objectives’. It explained it believed it was in the public interest not to prejudice the ongoing investigation.
32. Mr A argues TPR’s logic was incorrect and it was not in the public interest to allow [limited company] to act as trustee on a scheme for four years while under a criminal investigation by HMRC. He believes allowing it to continue, despite the potential criminal activities, resulted in the theft of his pension. We can entirely understand Mr A’s view on this point, and we know from our correspondence and from reviewing the case how significantly these matters have affected his life. He had money stolen from him and strongly believes this could have been prevented.
33. Whether TPR’s actions were in the public interest or not is subjective. ‘Public interest’ is essentially anything that affects the wellbeing – including finances – of the public. Though, clearly, this event has had a huge effect on Mr A, there was arguably also a wider public interest in allowing HMRC’s investigation to continue.
34. TPR has also explained the FOIA would have prevented them from publishing the determination notice. It explained that section 31(1)(g) and (2)(b)-(c) set out what information is exempt from public disclosure, including if publication would likely prejudice:
• any public authority from fulfilling its functions • the purpose of ascertaining whether any persons were responsible for improper conduct • the purpose of ascertaining whether the circumstances would justify regulatory action.
35. The FOIA provides public access to information held by public authorities such as TPR. In line with the FOIA, public authorities must publish certain information about their activities. In principle, this means everybody has the right to access official information, although there are exceptions. Public organisations can withhold information if there is a good reason to do so and the FOIA allows it. It appears that, in this instance, it was correct for TPR to withhold the information.
36. Its decision not to publish the determination notice felt incredibly unfair to Mr A, and we fully acknowledge the position he has been left in as a result of it. TPR had to balance the potential effect on individuals such as Mr A with longer-term considerations, such as not affecting HMRC’s investigation. It had to take care not to prejudice the investigation for the protection of individuals likely to come into contact with [limited company] in future, and this appears to have been reasonable.
37. We fully acknowledge Mr A does not agree, and we can entirely understand why. We consider TPR behaved reasonably and took account of the relevant considerations in deciding not to publish the determination notice sooner than it did.
38. We consider TPR’s actions were in line with the 2004 Act, the FOIA and our ‘Principles of Good Administration’.
Pension scheme tax reference number
39. Our ‘Principles of Good Administration’ say organisations should act according to their statutory powers and duties. They also say organisations should have regard to the relevant legislation in their decision-making.
40. HMRC explained to us how an organisation receives a PSTR number and what sanctions it can take if a registered scheme does not meet its responsibilities. It told us there is no single piece of established guidance or legislation that sets out how it should act in relation to PSTR numbers. Instead, it provided an explanation and breakdown of how it acts.
41. The Finance Act sets out in chapter 2, section 158, the grounds on which HMRC could deregister a pension scheme. Relevant to this complaint and Mr A’s comments on our provisional view, the Finance Act says that one of the grounds for deregistration is where the person who is, or any of the persons who are, the scheme administrator is not a fit and proper person to be:
• the scheme administrator, or • one of the persons who are the scheme administrator.
42. HMRC has explained that to be registered, a pension scheme must have a scheme administrator. To become a scheme administrator of a scheme established after 5 April 2006, entities need to make certain declarations to HMRC. Under tax law, the scheme administrator is the person or persons responsible for fulfilling certain functions defined in that legislation in connection with a registered pension scheme.
43. Responsibility within HMRC for tax reliefs on pension savings and pension tax relief rests with pension scheme services. This includes provisions on the registration of pension schemes. According to those provisions, a pension scheme administrator can apply for a pension scheme to be registered and thereby qualify for the tax breaks available to both pension schemes and their members. If the application is successful, HMRC issues a PSTR number to the registered scheme.
44. HMRC explained a pension scheme will then only become a registered pension scheme and subsequently receive a PSTR if it can also show it is:
• set up by a person or organisation with permission under the Financial Services and Markets Act 2000 to establish a personal pension or stakeholder pension scheme, for example a bank or insurance company • an occupational pension scheme set up by an employer for its employees • a public sector scheme set up under legislation or with parliamentary approval.
45. Prior to receiving registration status, the scheme administrator must complete declarations. One of the reasons for these declarations is to make sure the scheme administrator understands they may be liable to a penalty, and the pension scheme may be deregistered, if a false statement is made on the application or in respect of any of the information in it.
46. With regard to suspending a pension scheme, and key to this aspect of Mr A’s complaint, HMRC explained it has never had the power to do this. It says it can deregister a pension scheme as set out in the Finance Act 2004. It explained this involves a deregistration charge at 40% of the value in the scheme at the date of deregistration. This is due to the legislative obligations placed on scheme administrators to perform their roles properly. As there is no set guidance or legislation dictating a set of criteria to be met to warrant deregistration, HMRC applies its discretion to the situation based on the available evidence.
47. HMRC has explained that, based on the information provided and the declarations made at the time of the scheme’s registration, the scheme itself satisfied both the purpose and the founder tests, so it was eligible for registration and to remain an open registered scheme.
48. Individuals are entitled to transfer their benefits into a new occupational pension scheme, as they ultimately have the statutory right of transfer. HMRC itself has no authority or approval in respect of transfers between pension schemes. The individual initiates the pension transfer, usually after taking appropriate advice from an independent financial adviser, the existing pension scheme administrator, or the scheme administrator of the pension scheme to which the pension is being transferred.
49. In Mr A’s case, the registered independent financial adviser also happened to be a trustee of the scheme and advised him before the transfer taking place. As a trustee, this person had no involvement with the PSTR number. [limited company] acted partly as the registered administrator of the scheme and, as such, it was responsible for the scheme’s PSTR number and registration status. HMRC’s investigation (alongside the tribunal decision) did not find the administrators themselves participated in any illegal activity relating to the removal of Mr A’s pension.
50. Without any evidence the administrators engaged in illegal activity in relation to the scheme, HMRC had no grounds or precedent to deregister the scheme itself. Although determination notices were issued and [limited company] was found to have committed a criminal offence, these were related to some of the scheme’s trustees who were subsequently removed from their positions by TPR. The trustees have different responsibilities and roles to the administrators, and their actions have no effect on the scheme registration status.
51. We appreciate this will be understandably frustrating for Mr A. It has been established via the determination notices that scheme trustees did act incorrectly, and the TPR took actions against them. As set out above, this did not relate to HMRC’s action against the scheme administrators who, ultimately, are responsible for the scheme’s registration status. Without evidence that the administrators acted unlawfully in their role or that they were no longer fit to act as administrators, HMRC had no grounds to deregister the scheme and remove its PSTR number.
Independent trustee
52. Our ‘Principles of Good Administration’ say organisations should act according to their statutory powers and duties. They should also have regard to the relevant legislation in their decision-making.
53. The legislation that sets out TPR’s powers regarding trustees is the 1995 Act, specifically sections 7 and 23.
54. Section 7 of the Act relates to the appointment of trustees and sets out that where a trustee is removed, TPR has the power to appoint a replacement. Section 7(3) states TPR may do this where it is satisfied it is necessary to do so. Section 23 of the 1995 Act relates to independent trustees and sets out that TPR must only appoint one if it is not satisfied the scheme holds at least one independent trustee.
55. Although TPR took steps to remove a scheme trustee in accordance with the provisions of the determination notice, it did not subsequently appoint an independent trustee to the scheme. Mr A argues this constituted a failure to safeguard the scheme’s remaining assets and contributed to the unchecked fraud and the eventual theft of his pension fund.
56. We contacted TPR directly for clarification on this matter and to determine whether it should have appointed an independent trustee. It told us it based its decision on the concerns HMRC had specifically raised with it about criminal offences, which TPR later found out included dishonesty offences relating to the trustee. TPR explained it took decisions on a risk-based and proportionate basis while considering the evidence available to it at the time.
57. TPR told us it was under no obligation, as per the Act, to appoint a replacement trustee unless it felt there was no independent trustee already in place.
58. Ultimately, TPR has discretion as to whether or not it should appoint an independent trustee following any removal. The relevant grounds on which the TPR will appoint an independent trustee is where it is not satisfied at least one of the trustees of a scheme is independent.
59. TPR told us that, upon removal of the trustee as dictated by the determination notice, it was satisfied there was at least one independent trustee on the scheme. We can understand Mr A’s frustration with this position, given the events that followed, and we can only empathise with the immense difficulty those events have caused him.
60. In terms of TPR’s responsibilities and powers as set out in the Act, it was satisfied there was at least one independent trustee on the scheme, so it felt there was no need to actively appoint a replacement. To that end, we believe it acted in line with both the Act and our ‘Principles of Good Administration’.