Government Response to Consultation on Protecting Defined Benefit Pension Schemes
13 February 2019
The Government is to introduce two new criminal offences to prevent and penalise mismanagement of pension schemes.
In March 2018, a white paper was published ‘Protecting defined benefit pension schemes – a stronger Pensions Regulator’. Measures in this consultation included strengthening the Pensions Regulator’s powers both to enforce pensions legislation and to punish those who have acted recklessly or failed to comply with their obligations.
The Government has now published its response to this white paper which sets out respondent’s views and outlines the Government’s approach to progressing and moving forward with this programme of change. The changes will build on the robust system that is already in place to protect Defined Benefit pension schemes and will help to ensure that the system is equipped for the challenge of a continually evolving pension’s landscape. These changes will enable the Pensions Regulator to intervene where employers might evade their obligations, and help to meet their ambition to be ‘clearer, quicker, and tougher’. They will also further protect individuals’ pensions and ensure greater clarity for employers.
The Government will introduce two new criminal offences to prevent and penalise mismanagement of pension schemes:
The first will target individuals who wilfully or recklessly mishandle pension schemes, endangering workers’ pensions, by such things as chronic mismanagement of a business; or allowing huge unsustainable deficits to build up; or taking huge investment risks; or a combination thereof. A new custodial sentence of up to seven years’ imprisonment or an unlimited fine for this offence will be introduced. This brings the punishment in line with similar offences in financial services.
The second, which will attract an unlimited fine, will target individuals who fail to comply with a Contribution Notice, which is issued by The Pensions Regulator requiring a specified amount of money to be paid into the pension scheme by that individual. A new civil penalty of up to £1 million for this offence will also be introduced.
Commenting on the announcement regarding new powers for The Pensions Regulator (TPR), Nicola Parish, Executive Director for Frontline Regulation at TPR, said:
“We welcome the proposed new powers which, as a package, would allow us to identify potential problems earlier and take more effective action.
The vast majority of scheme sponsors and trustees already do the right thing and we will be helping them further by delivering clearer funding standards and a revised Defined Benefit (DB) Code of Practice.
Our new powers will act as a powerful deterrent against the poor treatment of pension schemes and help us in protecting members.
We are working closely with government to ensure that the new legislation is effective and works in practice.”