The Pensions Regulator (TPR) has outlined guidance on its new criminal sanctions policy which will come into force on October 1.
Employers who fall foul of these new regulations and attempt to dodge their pension promises could face a financial penalty of up to £1m.
The guidances coves its approach to investigating and prosecuting the new criminal offences of ‘avoidance of employer debt’ and ‘conduct risking accrued scheme benefits’.
TPR’s guidance covers descriptions of the offences including its approach to what it would consider a ‘reasonable excuse’. It also sets out the relevance of clearance statements to these offences as well as how cases are selected for investigation and prosecution.
The offences can only be made against occupational pension schemes and only applies if someone does or fails to do something which meets the relevant ‘act element’, the person had the relevant ‘mental element’ and if they didn’t have a reasonable excuse for acting in the way that they did.
The sanctions will only be used in “serious examples of intentional or reckless” conduct according to TPR.
AJ Bell head of retirement policy Tom Selby says: “The BHS pensions scandal exposed holes in the regulatory regime designed to protect the interests of defined benefit (DB) schemes. In particular, it appeared far too easy for employers to abandon their responsibilities to members, with the Pension Protection Fund at risk of being left to pick up the bill. In response, new criminal powers have been handed to The Pensions Regulator via the Pension Schemes Act 2021, meaning employers who ‘intentionally or recklessly’ dodge their pension responsibilities could face prosecution and fines of up to £1 million.
“Ultimately the regulator itself acknowledges that it may be up to the Courts to determine whether or not an employer is ‘intentional or reckless’ in its actions in relation to pension scheme members. What’s more, TPR goes out of its way to emphasise that these powers will only be used in the most serious cases, no doubt conscious of the fact it does not want to be seen as a barrier to legitimate corporate activity. While many will argue this is an example of the Government acting long after the horse has bolted, the very existence of these powers should act as a significant deterrent to poor behaviour and help ensure pension scheme members are not left high-and-dry as a result of negligence by company bosses.”