The Pensions Regulator (TPR) "should be willing to test their legal powers" more, Baroness Jeannie Drake has argued.
Giving evidence yesterday (6 June) at the Work & Pensions select committee hearing about the government's defined benefit white paper, British trade unionist and Labour life peer in the House of Lords Baroness Drake said if the watchdog is reluctant to use their legal powers people will be aware of it.
She said: "I wouldn't have The Pensions Regulator rushing to court on every occasion, because that would be counterproductive, but they should move themselves more to a position where they are willing [to do so].
"Where the case is good, where they feel the strength of their powers, then they should be culturally prepared to go, and be prepared to lose, because sometimes you gain from losing.
"Even if there are weaknesses, you learn from them. If you don't test that, you are just avoiding the issue."
The Pensions Regulator has been heavily criticised for its role in the Carillion collapse, with MPs accusing it of making "hollow threats" and failing "in all its objectives".
Carillion had 13 final defined benefit (DB) in the UK with more than 28,500 members when the company essentially folded, and an aggregate deficit for PPF purposes of around £800m.
It is expected that 11 of these plans will ultimately end up in the pensions lifeboat, with the vast majority of these already in assessment at the Pension Protection Fund (PPF).
The watchdog threatened to use its powers seven times during 2013 and 2014, but never enforced warnings.
The Pensions Regulator is expected to receive new legal powers from the defined benefit white paper.
Besides creating new legislation to introduce a criminal offence to punish those found to have committed wilful or grossly reckless behaviour in relation to a pension scheme, the government wants to give the watchdog powers to disqualify company directors, and introduce new punitive fines.
Bob Scott, outgoing chair of the Association of Consulting Actuaries and senior partner at LCP, argued the regulator's new criminal powers might not work.
He said: "Company directors are already potentially liable to a large number of potential sanctions under the Companies Act.
"Despite those, there are still gross failures on corporate governance. So, adding a specific offence in relation to the pension scheme may not deter those who don’t comply with their pension obligations anyway."
For Yvonne Braun, director of policy, long term savings and protection at the Association of British Insurers, criminal offences can be quite useful because they have a signalling effect and make it clear the enforcer won't tolerate that behaviour.
She added: "It may not be so easy to enforce them, but the signalling effect can be quite useful."