knowledge | 26 August 2019 |
Pensions ‘Whistleblowing’ in Ireland: Updated Guidance from the Pensions Authority
On 30 July 2019 the Pensions Authority (the “Authority”) issued guidance (“2019 Guidance”) aimed at assisting the making of a report to the Authority of suspected non-remittance of employee pension contributions and non-payment of employer contributions. The Pensions Act (the “Act”) requires that reports of material misappropriation or a fraudulent conversion of the resources of an occupational pension scheme or personal retirement savings accounts (“PRSA”) which is being attempted or has occurred are made to the Authority. These requirements are sometimes referred to as the Act’s “whistleblowing” provisions. The 2019 Guidance supplements previously published and more general guidance called “Compulsory and Voluntary Reporting to the Pensions Authority”, last updated in 2005 (“2005 Guidance”). This briefing seeks to give a brief overview of the Act’s whistleblowing provisions and the new 2019 Guidance.
Material misappropriation and fraudulent conversion under the Act
The Act provides that a “relevant person” (including trustees, auditor, actuary, investment manager, administrator/registered administrator and certain other persons carrying out work on behalf of the trustees) must make a report (“Mandatory Report”) to the Authority if that person has reasonable cause to believe that a material misappropriation or a fraudulent conversion has occurred, is occurring or is to be attempted. Material misappropriation and fraudulent conversion are not defined in the Act. A fraudulent conversion is typically easier to identify however whether something is a material misappropriation may be more difficult to establish.
The 2005 Guidance notes that a material misappropriation is one in which assets are appropriated by any person not entitled to them or where assets are appropriated to the use or benefit of a person otherwise than in accordance with the occupational pension scheme or PRSA provisions. It is clear from the 2019 Guidance that the Pensions Authority considers non-remittance and non-payment of contributions misappropriation of scheme assets. It falls to be considered in each case if the misappropriation is material and so requires to be reported.
Under the Act a Mandatory Report to the Authority must be made in writing “as soon as is practicable”. The person making the report does not have to have conclusive proof or even to be in a position to prove the matters on the balance of probabilities; all that is required is that the individual has reasonable cause.
Failure by a relevant person to make a Mandatory Report where they were aware of a material misappropriation (which includes a suspected non-remittance/non-payment of contributions) or fraudulent conversion is itself a breach of the Pensions Act and may render the relevant person liable to prosecution. It is also an offence for a relevant person to knowingly or wilfully make a report which is incorrect. If a relevant person is found guilty of an offence the individual is liable:
- on summary conviction to a fine not exceeding €5,000 or to imprisonment for a term not exceeding 1 year, or to both;
- on conviction on indictment to a fine not exceeding €25,000 or to imprisonment for a term not exceeding 2 years, or to both.
The Act provides protection to a relevant person who makes a Mandatory Report and to any person making a voluntary report of any matter concerning the state and conduct of an occupational pension scheme or the state of a PRSA (a “Voluntary Report”) where such reports are made in good faith.
Form of the Report
On 30 July the Authority issued a form for reporting suspected non-remittance/non-payment of contributions (“Form”). The aim of the Form is to achieve consistency in how reports of suspected non-remittance/non-payment of contributions are made.
The 2019 Guidance, issued with the Form, provides information on the completion of the Form and the items which need to be considered by the relevant person making the whistle-blowing report. The Authority emphasises in this 2019 Guidance that a report must be made “as soon as practicable” and helpfully notes that, in relation to non-remittance, the Authority considers this to be within three months of the first incident of non-remittance.
The 2019 Guidance clarifies that in circumstances of non-remittance “all avenues should be exhausted” to seek payment of the amounts outstanding reminders, warning letters. Evidence of the steps taken by the relevant person should be retained and submitted with the Form to the Authority (as explained in detail below). It requires that all possible legitimate reasons for non-receipt of contributions should be investigated before the Form is completed and sent to the Authority.
The Form requires the contact details of the person making the report, a preliminary analysis of the amount of the contributions in question and the number of affected employees, as well as an explanation as to how the person making the report became aware of the issue and the particular circumstances in which it arose, and specific details in relation to the communications issued by the individual to the party from whom the contributions should have been received (i.e. employer/trustee or financial advisor) seeking payment of the amounts due before making the report and any solutions offered and to any relevant third parties. This requirement seeks to ensure that the individual has taken steps to remedy the situation and obtain payment of the contributions before making the report. The Form requires the relevant person to provide supporting documentation to substantiate the allegations being made.
Persons considering making a report, may wish to consider the contents of the Authority’s Codes of Governance, in particular, Codes 4 Collection and Remittance of Contributions and Code 9 Risk Management.
The issuance by the Authority of a Form for use in cases of suspected non-remittance/non-payment of contributions and the further 2019 Guidance is welcome in offering guidance in an area which can be problematic for relevant persons and daunting given the mandatory nature of the reporting.
How can we help?
The Employment, Pensions & Incentives Group has significant experience in the area of whistleblowing, particularly in advising clients on determining if an issue is a material misappropriation or fraudulent conversion within the meaning of the Act and if it requires notification to the Authority. Ascertaining whether something is a material misappropriation is likely to depend on the facts and circumstances of each particular case. We are well placed to help clients complete this analysis.
We would be happy to assist with any queries you may have. Your usual McCann FitzGerald contact would also be pleased to provide further information.
Contributed By: Clementine Farrell
This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.