By common consent, the Occupational Pensions Regulatory Authority (Opra) has been overwhelmed by reports from trustees, their advisers, and others about breaches of the legislation, most of which on examination have turned out to be insignificant. Opra believes that in future most of these matters can be put right by trustees with the help of their advisers, without being reported to Opra.

However, scheme actuaries and auditors (where appointed in line with s.47 of the Pensions Act*) are obliged by s.48(1) to blow the whistle immediately, in writing to Opra, on any malpractice they encounter which

1. they have reasonable cause to believe amounts to non-compliance; and
2. is likely to be of "material significance".

As part of its new, more focused approach, Opra has published a consultation draft revision of Note 1 which provides more guidance to scheme actuaries and auditors on what is "materially significant". Broadly speaking, a breach of the law that has an immediate or a potentially detrimental impact on members' benefits or the safety of scheme assets would be materially significant to Opra. To help scheme auditors and scheme actuaries reach a decision as to whether or not to make a report, Opra has adopted a "traffic light" framework.

'Red' ('must-report') scenarios include matters indicating potential dishonesty or misuse of assets or contributions, and persistent non-payment of contributions by the employer. 'Green' ('should not report') scenarios include late payment of contributions for which there is no statutory requirement for trustees to report, and isolated, unintended and inconsequential breaches. These are largely understood already.

Of greater interest to many in the industry will be the discussion and guidance on 'amber' reporting scenarios, ie those likely to involve matters that do not pose an immediate threat to members' benefits, but raise concerns over the running of the scheme. Examples given in the consultation document include where there are several 'green' reporting scenarios which collectively suggest that the trustees may have insufficient knowledge or skills, or a forthcoming retirement of a senior executive in an underfunded scheme which is about to go into wind up.

Specific guidance is offered about schemes in wind up. Failure by trustees to make a progress report to Opra within the legislative timescale is a 'red' report. On the other hand, failure to obtain an MFR valuation in time where the scheme is in deficit and a GN 19 valuation has been completed is an example of a 'green' report. An 'amber' scenario would be where fees are being paid without evidence of commensurate progress being made in winding up.

Comments on this document should be sent to Rachel Low at Opra (email rachel.low@opra.gov.uk). The closing date for comments is 4 June 2003.