The new law comes in the wake of a series of high profile corporate collapses by companies with significant defined benefit (DB) pension scheme deficits, leaving thousands of members facing reduced benefits where schemes are passed into the Pension Protection Fund (PPF), reports the Observer.
The Pensions Regulator (TPR) will be given stronger powers to intervene where it detects issues.
The move comes as it emerged that Carillion rejected a proposal that could have put £218m into its pension scheme, because it thought it would be able to return to profitability.
Carillion, the stricken construction company, had paid an increasing dividend for 16 years while presiding over a pension deficit in excess of half a billion pounds. Meanwhile, last June the Pensions Regulator warned that the ratio of deficit repair contributions (DRCs) to dividend payments by sponsoring employers had declined.
Prime minister Theresa May said: “It is absolutely vital that people who work hard and contribute to society throughout their career can have the confidence that their pension will pay out in retirement.”
“I am committed to making sure our economy works for everyone – backing businesses to create good jobs but stepping in to make sure they play by the rules.
“That’s why my government is making sure the Pensions Regulator has the powers it needs to crack down on the minority of businesses who shirk their responsibilities.
“The action we are taking will ensure that the majority of responsible employees, employers and pension schemes will no longer have to bail out the irresponsible few.”
Pensions and Lifetime Savings Association director of external affairs Graham Vidler says: “We welcome the Prime Minister’s proposals to crack down on reckless behaviour which puts DB pensions at risk. 11 million people depend on DB for their future income and a focus on protecting the security of those pensions is essential. As well as introducing criminal sanctions we’ll be looking to the forthcoming White Paper to strengthen and clarify the Pensions Regulator’s powers and to help more schemes take advantage of the opportunities of consolidation.”