The UK’s pensions regulator today published for consultation guidance on how it will use new criminal powers given to it by recently passed legislation, with pensions industry representatives saying it was helpful but unlikely to dispel concerns about unintended consequences.
Punishable by an unlimited fine and/or up to seven years in prison, the criminal offences – avoidance of a statutory employer debt and conduct risking accrued defined benefit (DB) savings – have caused considerable industry alarm given that the criminal powers have been widely drawn.
David Fairs, executive director of regulatory policy at The Pensions Regulator (TPR), called on the industry to take part in the consultation as TPR finalised its policy, saying “it is important our approach is clear and understood”.
He said the policy was consistent with the intent “not to change commercial norms or accepted standards of corporate behaviour”, but “to tackle the more serious examples of intentional or reckless conduct”.
The regulator said the two offences outlined in the draft policy would be committed if someone acts, or fails to act, with the relevant intention and does not have a reasonable explanation for their behaviour. The onus would be on the prosecution to prove that the accused did not have a reasonable excuse.
Fairs added: “We appreciate the industry’s interest in our intended approach to investigating and prosecuting people under these new offences and the desire for clarity.
“The policy discusses in detail the points of similarity and differences with our existing anti-avoidance powers and provides examples of the types of behaviour that could fall within the scope of the new offences.”
Joe Dabrowski, deputy director of policy at the Pensions & Lifetime Savings Association, said the examples in the guidance were a helpful starting place, and that the association would speak with its members about whether they were suitable and went far enough.
However, he continued: “What the draft policy does not, and cannot, address is the key issue of the ‘unknown unknowns’ – the potential for unintended consequences, and any future interpretations of the legislation by the Courts.
“Even in the best case scenario this will generate substantial extra, and probably unnecessary, compliance overheads.”
Laura Amin, principal at consultancy LCP, said the guidance offered some reassurance that normal business behaviour would not be caught, but warned that “what seems defensible today may look very different through the lens of history, especially if things go wrong”.
“Corporate Britain cannot afford to relax and needs to make sure that all key decisions are seen through a pensions lens and go through a proper and well documented decision-making process,” she said.
The view that grey areas remained was mentioned by several industry professionals.
Luke Hartley, director at Lincoln Pensions, said this was particularly the case around restructuring situations.
He said the draft guidance provided some reassurance but the “continuing concern is that TPR’s additional powers will make otherwise beneficial deals too risky, leading to worse outcomes on average for members”.
The consultation will close on 22 April 2021.