Developments in Employee Benefits law and practice

21 May 2018

Brewery and its chairman admit failing to hand over information to The Pensions Regulator

Samuel Smith Old Brewery (Tadcaster) and its chairman Humphrey Smith have admitted failing to hand over information to The Pensions Regulator (TPR).

Information about the company’s financial situation was required as part of TPR’s investigation into its pension schemes.

TPR opened an investigation following submission of the 2015 valuation of some of the company’s final salary pension schemes and asked for financial information from the company to seek assurances the schemes could be financially supported.

The company did not provide the information by the deadline set in TPR’s statutory request issued under section 72 of the Pensions Act 2004. The information has now been provided to TPR.

At Brighton Magistrates’ Court (on 15 May) Humphrey Smith and Samuel Smith Old Brewery pleaded guilty to neglecting or refusing to provide information and documents without a reasonable excuse, contrary to section 77(1) of the Pensions Act 2004. Humphrey Smith was charged on the basis that he consented to or connived in the offence by the company, or caused it by his neglect.

The case is the sixth criminal conviction secured by TPR against individuals or organisations for failing to comply with section 72 notices.

Nicola Parish, TPR’s Executive Director of Frontline Regulation, said: “We are satisfied with the outcome of this case, the latest in a series of successful prosecutions by TPR for offences of this kind.

“This sends a clear message to employers that we are serious when we ask for information. We require it for good reason as part of our work to protect pension savers. Anyone who does not cooperate with our requests also risks getting a criminal record.”

The case was adjourned for sentencing until 6 June.

Healthcare company fined after misleading TPR about staff workplace pensions

A healthcare company and its managing director have been ordered to pay more than £20,000 after they admitted misleading The Pensions Regulator (TPR) about providing their staff with a workplace pension.

Birmingham-based Crest Healthcare and managing director Sheila Aluko each pleaded guilty to one charge of knowingly or recklessly providing false or misleading information to TPR and two counts of wilfully failing to comply with their automatic enrolment duties when they appeared at Brighton Magistrates’ Court on 7 March.

A whistleblower prompted the investigation into Crest Healthcare after contacting TPR to complain that workers at the company suspected that they had been misled into falsely believing that their pension scheme was up and running. Contributions were being taken from the pay packets of the workers but Crest Healthcare would not give them information about their scheme.

Sentencing the company and Aluko at Brighton Magistrates' Court (on 15 May), District Judge Teresa Szagun said that it was important to show that individuals and companies did not benefit from avoiding their automatic enrolment responsibilities.

The judge said Aluko “must, as an intelligent businesswoman, have appreciated the obligations on her and also the intent of automatic enrolment” and said her response to the requests of the whistleblower was “dismissive”.

She said: “The need to deter this type of offending requires a penalty proportionate with the seriousness of the offence.”

Judge Szagun fined Crest Healthcare £13,000 and ordered the company to pay £3,404 costs and a £120 victim surcharge. She fined Sheila Aluko £1,624 and ordered her to pay £3,404 costs and a £120 victim surcharge.

Darren Ryder, TPR’s Director of Automatic Enrolment, said:

“Whistleblowers have a vital role to play in helping us ensure workers are getting the pensions they are entitled to.

“The whistleblower in this case highlighted that workers who asked Sheila Aluko about their pensions were being fobbed off with the false claim that they had been automatically enrolled. When we investigated, Aluko's story unravelled.

“I would urge anyone who believes their employer is breaching its automatic enrolment duties to contact us.

“We will not tolerate non-compliance and, as this case shows, neither will the courts.”

Upper Tribunal rules in favour of TPR in anti-avoidance case against ITV

The Upper Tribunal has confirmed that The Pensions Regulator (TPR) was right to use its powers to seek financial support from ITV for members of the Box Clever pension scheme.

Published on 18 May, the judgment follows a two-week hearing in January of the substantive issues in the case – the first anti-avoidance case by TPR to be heard in full by the tribunal.

The court found that TPR was right to pursue the use of its Financial Support Direction (FSD) power against ITV to require it to provide support for the Box Clever scheme, which has 2,800 members and a deficit of c.£115 million.

Mike Birch, TPR’s Director of Case Management, said: "We are very pleased with this ruling which sends a clear message to companies linked with defined benefit pension schemes that we will not hesitate to use our anti-avoidance powers where we believe it is reasonable for them to provide financial support. We will pursue these cases for as long as necessary to protect pension savers and the Pension Protection Fund.

“This has been a long and complex case, where the targets have raised numerous legal challenges causing significant delays in an outcome being reached. We now hope that ITV will accept the Upper Tribunal’s findings and seek to work with TPR to put in place appropriate financial support for the scheme and deliver a good outcome for members.”

Box Clever was formed in 2000 as a joint venture between the TV rental businesses of Granada (now ITV) and Thorn (now Carmelite). Respective employees were transferred to the new company and enrolled in the Box Clever pension scheme.

TPR opened an anti-avoidance investigation following the collapse of Box Clever. Prior to the collapse, ITV extracted significant value from the joint venture.

The Tribunal ruled that it is reasonable for ITV to provide financial support for the scheme in the circumstances of this case. The judges held that:

“By their choice of structure for the Joint Venture, the Shareholders extracted considerable cash from the business with no risk of recourse to their assets. They retained an ongoing interest in the merged business with the possibility of further value being generated if the business was successful, but without having to bear any responsibility if the business, whose strategy they continued to determine, subsequently failed.”

ITV has 14 days to seek permission to appeal the Tribunal’s decision. If there is no appeal, TPR’s Determinations Panel will issue Financial Support Directions to ITV.

The Tribunal’s judgment also clarifies a number of points of law regarding how and when TPR can use its FSD powers. In particular, the Tribunal agreed with TPR’s position on the following:

  • Retrospective use – The purpose of the FSD regime is to provide a rescue framework for pension schemes in deficit. TPR could not meet its objectives if it could not take into account events which occurred prior to the Pensions Act 2004 coming into force – for example, many scheme and company structures were created prior to 2004.
  • Fault – The regime is not fault based and so does not require criticism or blame to be found against the targets for their conduct in respect of the pension scheme. It is instead a regime based on responsibility – in this case the targets chose the structure of the joint venture and should therefore bear appropriate responsibility for the risks.
  • Reasonableness – This is assessed by balancing all the relevant facts to reach a conclusion, with the relationship between the targets and the pension scheme as the starting point. When making this assessment terms from the legislation such as “benefit”, “relationship with the employer” and “involvement with the scheme” should be given a wide interpretation. An FSD may still be issued against a target even if it has not received any substantial benefit from its relationship with the pension scheme’s sponsoring employer, although in this case the Tribunal found that ITV had received valuable benefit from the creation of the employer.

The judgement can be viewed at:

FRC update in relation to Carillion investigation

Given the clear public interest in this matter, the Financial Reporting Council (FRC) is providing an update on its investigation into Carillion. The main areas of focus for the investigations of KPMG’s audit of Carillion (2014 – 2017) and of two finance directors Richard Adam and Zafar Khan are: contract accounting; reverse factoring; pensions; goodwill and going concern. Good progress with the investigation is being made by the FRC’s team of lawyers and forensic accountants.

Key activities underway are:

  • Reviewing the audit files for the four year period as well as other material relevant to the financial statements and audits of Carillion, including accounting documents produced by the company and emails and other correspondence from the relevant period.  The FRC expects to review tens of thousands of documents and emails in order to establish how and why audit and accounting decisions were reached.
  • Collaborating with the OR (Insolvency Service), the FCA and the Pensions Regulator.  As liquidator of the Carillion companies, the OR has access to the bulk of the Carillion material and work is ongoing to ensure a lawful and efficient mechanism for sharing relevant material between the regulators.
  • The first of many detailed and recorded interviews and fact-finding meetings with those under investigation and other relevant witnesses have been conducted. Further interviews may be held as the responses of one interviewee often needs to be considered and analysed prior to conducting interviews of others.  It frequently takes several months to prepare, schedule and conduct a series of interviews.

FRC investigations are often complex and extensive and any findings may be challenged by experts, lawyers and, if applicable, Tribunal members.  This requires detailed and rigorous legal and evidential analysis. The FRC will complete the work relating to Carillion as quickly as possible.

The speed of the FRC’s investigations may also rely on the level of cooperation of those under investigation, audit clients and third parties (for example: other regulators and liquidators). The Carillion case is one of the largest the FRC has investigated.  The FRC will not cut corners to conclude its investigations as that may compromise the integrity of any enforcement action.


John W. Wilson LLB(Hons) FPMI ACII, Head of Research| Email:

Stephen Williams, Senior Research Consultant | Email: