Breach ERI limits at your own peril, TPR warns in new guidance

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The Pensions Regulator has created a new guide for trustees and employers to remind them of the limits that apply to self-investment and that they can be prosecuted if they breach them. The regulator previously secured convictions for those that used pension money to fund the sponsor’s activities. 
The guidance is a new document to remind companies and trustees that with few exceptions, no more than 5% of the current market value of pension scheme assets can be invested in the employer at any one time, and no assets must be loaned to it. It is a criminal offence to breach this limit. Employer-related investments can consist of securities, land, property and loans among others. 
TPR’s director of enforcement Erica Carroll urged trustees to read the guidance so they understand the restrictions.  
She said: “Trustees should be in no doubt that where we see savers’ funds being illegally invested, we will take firm action, which could result in a prison term.” 
 Trustees who breach ERI restrictions can be fined up to £5,000 for individual trustees, £50,000 for corporate trustees, imprisonment or both a fine and imprisonment. The law imposes a strict liability for any breach, so TPR does not need to prove an intention on the part of the accused. However, where it considers that the breach happened unintentionally, it may pursue a financial penalty as the outcome, rather than imprisonment. 
TPR successfully prosecuted the former owner of Norton Motorcycles, Stuart Garner, last year. Garner was handed a suspended prison sentence for investing the money of pension schemes where he was a trustee into his business. 
In November last year, two former pension scheme trustees received suspended prison sentences for making illegal loans of £236,000 from a company pension scheme to the scheme’s employer. 
In 2021, the regulator published an enforcement case about Roger Bessent, a director of business advisory firm Gleeson Bessent, to show how it used its powers in respect of employer-related investment breaches. Bessent was given a 35-month prison sentence and ordered to pay back over £233,000 of scheme members’ savings. 
TPR produced its enforcement policy last October following a consultation. 
Is the risk of illegal ERI higher in times of economic stress? 

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