Defined Benefit  

Mismanaging pensions to become criminal offence

Mismanaging pensions to become criminal offence

Bosses who put their staff pensions at risk will face up to seven years in prison, according to new rules revealed by Amber Rudd.

In an article in the Sunday Telegraph, the secretary for Work and Pensions (pictured) revealed that "wilful or reckless behaviour" relating to a pension scheme will become a criminal offence, to avoid future "Philip Green-style pension scandals".

The new sanctions – which also give courts the power to levy unlimited fines – are part of the new powers given to The Pensions Regulator (TPR).

The rules will enable the watchdog to get involved more quickly and more often when companies make changes which could damage their pension schemes.

The framework was published in March last year as part of the DWP's defined benefit white paper, which set out a series of new measures for the regulator "to undertake a tougher and more proactive role".

Several pension experts have applauded yesterday’s announcement, such as former pensions minister Baroness Ros Altmann.

She said: "Government and regulators must be vigilant to ensure employers cannot just ignore their pension liabilities.

"The pension scheme ranks as an unsecured creditor, alongside all other unsecured creditors and recent insolvencies have suggested investors or shareholders can be prioritised over workers' pensions.

"Company directors need to recognise that their pension scheme is not just like any other unsecured creditor, these liabilities have people's lives attached."

Independent Labour MP and chairman of the Work and Pensions select committee, Frank Field, said Ms Rudd "deserves huge credit for stepping in to sort this so early in her tenure, where others have so long failed to act".

He added: "But most people would be aghast to hear that this law doesn’t already exist. How could it ever have been legal for company bosses to recklessly or wilfully or risk their workers’ pensions?

"Retrospection in the law is usually to be avoided, and for good reason. But the actions of greedy bosses like those at BHS and Carillion have torn apart thousands of people’s plans for the future.

"In such exceptional circumstances, shouldn’t the long arm of the law be able to reach into the past, to gain justice for those who lost so much?"

However, other experts were more sceptical about the new measures.

Sir Steve Webb, former pensions minister and director of policy at Royal London, noted the plans were first announced back in 2017 and were still years away from being put into effect.

He said: "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 weren’t picked up and addressed much earlier in the process, rather than the lack of a strong penalty after the event.