As if trustees and sponsoring employers didn’t have enough on their plates dealing with the aftermath of Brexit and Covid 19, along comes the Pensions Act 2021 which has now received Royal Assent.
So what you may think. In fact there is a lot of ‘what’ to worry about especially if you are the sponsoring employer, not least of which is the introduction of 2 new criminal offences into the Pensions Regulator’s little toolkit of sanctions for Defined Benefit Schemes.
The first new offence concerns the avoidance of Employer Debt. The second is engaging in conduct risking accrued benefits. Both offences carry up to 7 years imprisonment on indictment, a fine or both. The detail of the new offences are complex and are likely to lead to some juicy litigations on interpretation in due course. Both have a reasonable excuse defence and the draft policy document issued by the Pensions Regulator goes into some length on what may amount to a reasonable excuse.
While the Pensions Regulator may have been rather reluctant in the past to to use its existing criminal powers (I think the number of cases can be counted on the fingers of one hand) the indication has already been made that it will select cases ‘mindful of the policy intent behind the new offences’ - for example, where the Regulator or the PPF or indeed the trustees have been misled in some significant way, or where the purpose of the conduct has been to abandon the scheme with no provision for its ongoing health or funding has been put in place, or where the scheme has been treated unfairly (as against the shareholders) or where the employer has made significant financial gain at the expense of funding the scheme adequately.
The Regulator has also set out some examples which might favour a prosecution - asset stripping or not replacing a Section 75 Guarantee on the sale of the Employer are just two of these.
There is a current Consultation on the draft policy which closes on 22 April and the Pensions Regulator will report on its findings in due course - probably later this year.
Whether this will lead to a change in corporate behaviours will need to be assessed. The Pensions Regulator says it does not believe this will be the case but it is intended to catch those who deliberately or recklessly set out to undermine the scheme. It acknowledges that the existing Contribution Notice regime may already catch some of this activity but it spreads the net wider by potentially involving anyone (except insolvency practitioners) not just employers or someone connected to them as is the case with CNs.
So let’s hope that the Pensions Regulator continues to act with great responsibility and to everyone else...be careful out there...
