UK Tribunal Upholds TPR’s Pension Contribution Notice Powers

A U.K. tribunal has upheld The Pensions Regulator’s issuance of a contribution notice for almost 1.9 million pounds ($2.43 million) to be paid into the Meghraj Group Pension Scheme by Anant Shah, the former owner of the plan’s sponsor.

The case was related to the Meghraj Group of companies, an international investment and banking advisory and fiduciary services firm. Subsidiary Meghraj Financial Services Ltd., the plan’s former sponsor, entered into a creditors’ voluntary liquidation in 2014 that left the plan with a deficit of approximately 5.85 million pounds.

According to TPR, it investigated a series of payments made from Meghraj Financial Services to its parent company, Meghraj Property Ltd., and found the payments followed the firm’s disposal of its shares in a joint venture company with most of the sums paid out as dividends. However, the payments should have been used to fund the plan, and failing to do so was materially detrimental to the plan’s participants, TPR determined.

During a previous hearing before TPR’s Determinations Panel in February 2020, the regulator argued that it was reasonable to issue a contribution notice against Anant Shah, a director of MFSL, and his nephew, Rohin Shah. The panel agreed and issued a determination notice in June 2020 confirming a contribution notice of almost 3.7 million pounds against Anant Shah and Rohin Shah. Both referred the decision to the Upper Tribunal, but Rohin Shah settled with TPR before the hearing.

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The Upper Tribunal, responsible for hearing challenges against certain regulators, including TPR, upheld the regulator’s decision to issue a contribution notice against Anant Shah.

The tribunal agreed with TPR that it was reasonable Anant Shah pay a contribution notice, which included 50% of the sum that should have been paid into the plan, in addition to an uplift to account for the passage of time.

The tribunal also agreed with TPR that when it considers how much to order a target of a contribution notice to pay, it should not be limited to considering the loss to a plan resulting from the acts or inactions. In its ruling, the tribunal stated that when considering the reasonableness of a contribution notice, the amount “is not limited to the target’s current financial worth but also includes consideration of how the target has ended up in the financial position in which he currently finds himself. This includes taking into account the target’s receipt of monies and how they have been used.”

According to TPR, it is the first substantive case the Upper Tribunal has heard regarding the regulator’s contribution notice power.

“We welcome this clear and helpful judgment, which supports our long-held views about how the legislation should be interpreted,” Erica Carroll, TPR’s director of enforcement, said in a release. “It provides clarity on how CN sums should be calculated by confirming they are not limited by the loss to the scheme. This ends the speculation caused by past cases over whether these sums should be purely compensatory.”