Directors could land jail term for pension mis-management
11 Feb 2019
The government is to introduce a new criminal offence of ‘wilful or reckless behaviour’ in relation to pensions, which would see ‘devil may care’ directors facing up to seven years in jail, under proposals to crack down on abuse of final or average salary schemes
11 Feb 2019
The move is designed to ensure company bosses who allow deficits to escalate to unsustainable levels, or who endanger their workers’ savings through chronic mismanagement, face the full force of the law.
High profile collapses such as that of retailer BHS have shone a spotlight on concerns around failure to fund pension schemes adequately, or to take account of the possible impact on such schemes in the event of a takeover.
It comes as latest figures revealed more than 10 million people have been brought into workplace pensions saving by automatic enrolment since 2012.
In its response to a consultation on protecting defined benefit contribution pension schemes, which ran from June to August last year, the government said it 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.
There will be a new custodial sentence of up to seven years’ imprisonment or an unlimited fine for this offence, bringing 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. There will be a new civil penalty of up to £1m for this offence.
Amber Rudd secretary of state for work and pensions, said: ‘For too long the reckless few playing fast and loose with people’s futures have got away scot-free. Acts of astonishing arrogance and abandon punished only with fines, barely denting bosses’ bank balances.
‘Meanwhile workers who have done the right thing and saved for retirement, confident their investments were safe, are left facing a leaner later life.
‘That cannot be right, which is why, for the first time, we’re going to make wilful or reckless behaviour relating to pensions a criminal offence.’
Rudd also indicated the government is considering changes to the auto enrolment regime to encourage younger workers and part-time and lower earners and the self-employed, to save more.
Minimum contribution rates under automatic enrolment are due to rise from 5% to 8% in April.
The Department for Work and Pensions (DWP) says its research suggests saving behaviour is sticking: the first increase in minimum contributions which took place last year has not prompted people to stop saving.
The proportion stopping saving through automatic enrolment was just 0.7% in the three months following the April 2018 increase in contribution rates, compared to 0.6% for the four year period beforehand.
Report by Pat Sweet