The UK’s secretary of state for work and pension has unveiled a bill that would target those abusing pension schemes, but critics are unconvinced.
The move shows a tougher stance on sentencing guidelines; increasing jail terms to seven years, compared to the two years outlined in 2018.
“For too long the reckless few playing fast and loose with people’s futures have got away scot-free,” said Amber Rudd.
“Acts of astonishing arrogance and abandon punished only with fines, barely denting bosses’ bank balances.
“Meanwhile workers who have done the right thing and saved for retirement, confident their investments were safe, are left facing a leaner later life.
“That cannot be right, which is why, for the first time, we’re going to make wilful or reckless behaviour relating to pensions a criminal offence.”
The bill followed the outcome of a consultation – Protecting Defined Benefit Pension Schemes: A Stronger Pensions Regulator – which took place during the summer of 2018, outlining the government’s plans on reforming pension sanctions.
Greater powers to pension regulator
The proposal would give The Pensions Regulator (TPR) more powers to go after reckless pension scheme sponsors.
This would include:
– Greater information gathering powers, including standalone interviews and inspection powers, as well as fixed and escalating penalties for non-compliance;
– Flexible sanction regimes, with a mixture of civil and criminal penalties;
– Changes to the notifiable events framework that would work as an early warning system, allowing TPR to be informed on significant developments and intervene quickly; and,
– Broadened purpose of TPR’s financial support direction powers and contribution notice.
“Our new powers will act as a powerful deterrent against the poor treatment of pension schemes and help us in protecting members,” said Nicola Parish, executive director of frontline regulation at TPR.
“We are working closely with government to ensure that the new legislation is effective and works in practice.”
The move also follows the scandals surrounding BHS and Carillion and their pension schemes deficits.
‘Headlines’ over workers’ pensions
However, the bill was greeted with criticism.
Some of the people that replied to the consultation in 2018 felt that higher sanctions could hurt businesses and pension scheme trustees.
While, the proposal aims to promote “positive behaviour” and “properly run businesses”, it can affect employers on defined benefit (DB) schemes. The possible increases in legal and compliance costs, reduced investments and delayed transactions, could mean that employers with DB schemes would be disadvantaged.
Other criticism regarded the identification of the “reckless few” as it would be hard to prove. Additionally, the implementation of the bill would not be time sensitive as it could take years to put it in place.
Steve Webb, director of policy at Royal London and former pension minister, said: “We first heard of these plans back in 2017 and we are still years away from seeing them put into effect. It will be very hard to prove that someone ‘recklessly’ under-funded their pension scheme, especially with the high level of proof needed to jail someone for up to seven years.
“There is a risk that those who failed to do all they could will get away scot free. The issue with BHS was that the problems were not picked up and addressed much earlier in the process, rather than the lack of a strong penalty after the event. These new laws are more likely to generate headlines than to protect workers’ pensions.”
