Pensions Bulletin 2025/33

Regulator publishes report on trustee involvement in illegal employer-related investment activity 

The Pensions Regulator has published a regulatory intervention report relating to a previously reported case (see Pensions Bulletin 2024/01) in which successful criminal proceedings were brought against a trustee, Mr Smith of the Worthington Employee Pension Top Up Scheme, for breaking the employer-related investment restrictions set out in the Pensions Act 1995. 

Announcing this latest report the Regulator warns that pension trustees face large fines or even jail if they flout investment rules designed to protect savers, although we do not believe that any trustees have actually been incarcerated yet as a result of illegal employer-related investment activity. 

The Regulator’s report sets out the background which resulted, in January 2024, in Mr Smith being handed a 10-month prison sentence at Burnley Crown Court, suspended for 12 months, after admitting to using scheme funds to make five prohibited loans to entities connected to the scheme’s sponsoring employer, Marcus Worthington and Company Ltd. He was also ordered to complete 150 hours of community service and pay £1,000 in prosecution costs. 

Earlier, the Regulator had fined a second trustee £29,000 for six employer-related investment breaches following a decision not to prosecute him. Criminal proceedings were also initiated against another trustee and a professional adviser, with this trustee appearing in Court, but the Regulator subsequently decided not to proceed with the case and the court recorded not guilty verdicts in respect of all matters concerning him. The professional adviser was charged with four counts of assisting or encouraging prohibited loans but passed away before he could be brought to trial.  

The top-up scheme appeared to have been established on a bona-fide basis, with the purpose of providing money purchase top ups for long-serving employees to other pension benefits they had accrued. However, starting some three years after its establishment in 2006, the scheme’s trustees proceeded to make loans that were illegal under the Pensions Act 1995 which later resulted in nearly all of the scheme’s assets being invested in a business and a trust connected to the employer. 

All scheme funds were subsequently lost as the business failed. However, the Pensions Regulator is hoping that by appointing an independent trustee to the scheme, if the scheme proves to be eligible, a claim from the Fraud Compensation Fund on behalf of members can be pursued. 

Regulator calls on DC trustees to address the retirement income challenge  

Under the call to arms of “Adequacy is the challenge of our time”, Patrick Coyne, who has recently been appointed as Interim Director of Pensions Reform at the Pensions Regulator, has blogged not on the inadequacy of current levels of contributions into most DC schemes but on the subject of delivering retirement income from DC pots. 

Referencing a number of recent surveys that lend support to a need for regulatory intervention in this area he calls on DC trustees to rethink their role “not just as stewards of assets, but as enablers of good retirement outcomes”. He calls on trustees to consider how different defaults will suit different types of savers and for trustees to bring forward plans for “simple but tailored support, smarter decumulation strategies, and clearer guidance”. 

He concludes by asking DC trustees to take three steps now: 

• Engage with members – understand their goals, gaps, and preferences (when it comes to taking retirement income from a DC pot) and use this insight to shape strategies. 
• Promote trusted guidance – make Pension Wise and MoneyHelper part of core scheme communications. 
• Prepare for change – get ready for dashboards, the guided retirement duties under the Pension Schemes Bill, and a more engaged membership. 

State Pension Age – Call for Evidence issued 

Dr Suzy Morrissey, who was appointed to prepare an independent report ahead of the third review of State Pension Age (see Pensions Bulletin 2025/29) has issued, through the Department for Work and Pensions, a call for evidence on the key factors government should consider in determining State Pension Age for future decades. 

These factors include the merits of linking State Pension Age to life expectancy, the role of State Pension Age in managing the long-term sustainability of the State Pension, and the international experience of Automatic Adjustment Mechanisms (AAMs) for making decisions about State Pension Age. 

After setting out a number of background aspects, including changes in life expectancy, a number of questions are posed on the above topics. The call for evidence closes on 24 October 2025. 

FCA publishes findings from its review of pension transfer processes   

The Financial Conduct Authority has published the findings from its multi-firm review of life insurers' pension transfer processes. This review followed earlier concerns raised by the FCA about the poor customer service some consumers get from life insurance firms, particularly slow transfer and claim settlement times.  

From the data examined by the FCA nearly one million transfer requests had been received over a 12-month period by the 18 life insurance firms reviewed. Where a transfer required no additional checks, the FCA found that over three-quarters of the firms completed these transfers within 10 days, with the shortest time being 5 days. But where additional steps and checks were carried out, half of the firms took between 41-80 days to complete these transfers on average, with the rest taking between 26 and 160 days. 

In relation to the flags under the Conditions for Transfer Regulations 2021, the FCA says that once an instruction to transfer had been received by the ceding scheme, an amber flag was applied on fewer than 2% of the transfer requests received, with the main reasons for the flag being that the receiving scheme included high-risk or unregulated investments, had charges that were high or unclear or included overseas investments. And fewer than 1% of transfer requests were stopped by the ceding scheme (ie as a result of a red flag being raised). Common reasons for this were that the member either did not provide the required information or evidence of receiving guidance from MoneyHelper where required or had requested the transfer after an unsolicited contact or that a regulated activity had been carried out by someone without the right regulated status. 

In conclusion the FCA says that the life insurers in its survey have good intentions when it comes to protecting customers from scams, most transfers are completed within a reasonable time, but some have slower service times and the FCA will be following this issue up with these firms. 

More than £80m paid out in respect of more than 2,000 pension scam victims 

The Pensions Regulator has issued a rather lengthy press release which is centred on the fact that the Fraud Compensation Fund (FCF) has now paid out £81.5m in compensation to 58 pension schemes in respect of more than 2,000 individuals who “were defrauded by scammers”. The FCF has also issued a rather shorter press release. 

These payments are linked to the 2020 High Court ruling (see Pensions Bulletin 2020/47) which established that occupational pension schemes set up as part of a scam could potentially be eligible for FCF compensation and which has been the cause of substantial and sustained increases in the FCF levy ever since.

The Regulator says that more payments are to follow for other victims whilst the FCF encourages members who think they may be eligible to get in touch with them to see if they are entitled to FCF compensation. It also usefully provides a link to its list of schemes that have been or are being considered for eligibility for compensation.  

New Pensions Ombudsman Chair blogs support for its “ambitious programme of change”   

Deborah Evans, the newly appointed Chair of the Pensions Ombudsman, has set out her thoughts on joining the organisation as it responds to the need to deal with queries more quickly whilst facing the challenge of an increasing workload. 

Stating that the Pensions Ombudsman provides “an essential public service resolving issues with personal and occupational pensions, impartially and free at the point of delivery”, she references and draws out some aspects from the recent annual report and accounts (see Pensions Bulletin 2025/29) and corporate strategy documents (see Pensions Bulletin 2025/31). 

She concludes by saying that she is committed to the current “agile approach” in relation to delivering on efficiencies that will enable the Ombudsman service to “shape and respond to change in a timely manner”.