UK - The Pensions Regulator (TPR) has highlighted the importance of good governance in the economic downturn as schemes may be more vulnerable to "certain actions which give us cause for concern" such as fraud and inappropriate transfers.

In the statement entitled Alert to the economic downturn, TPR acknowledged the "vast majority of schemes are well-run by dedicated and hard-working individuals", but added governance is "more, not less, important during the downturn".

TPR suggested the financial situation "may accentuate the vulnerability of some schemes to certain actions which give us cause for concern"; at the extreme end this includes fraud and dishonesty.

Although the regulator noted these situations are "very rare, the risk is nonetheless real", and warned scheme members could be targeted through offers of accessing pension assets through "trust-busting or pension liberation activities", which could result in civil and criminal investigation.

In addition, TPR highlighted certain behaviours that would "unacceptably increase risks to members' benefits" including the avoidance of employer debt, inappropriate transfers from underfunded schemes, employer related self-investment and poor practice relating to transfer incentives.

TPR warned it intends to investigate and take steps to "prevent or sanction against such behaviour where appropriate", but it emphasised the importance of whistle-blowing reports as a key source of information.

TPR pointed out that employers, trustees, advisers, managers and administrators all have a statutory duty to report "materially significant" breaches of legislation, including anything involving dishonesty, and noted this requirement overrides any other duties such as confidentiality.

Tony Hobman, chief executive of TPR, said: "We remain assured that the regulatory framework is flexible enough to cope with the impact of the economic downturn, and will continue to remain vigilant through the downturn and encourage others to do the same, and to contact us if they have concerns."

Paul Jayson, partner at Barnett Waddingham, claimed the statement was "timely and useful", and suggested now would be a good time for managers and trustees to review control processes and where these risks might appear.
 
He warned: "The risks can come from many directions. As well as monitoring schemes' assets for fraudulent activity or breaches of ‘self-investment' limits, trustees should be on the lookout for 'trust-busters' or 'pensions liberators', making sure that where a member takes a transfer of their benefits it is to a bone fide alternative pension arrangement."
 
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