The pensions press has been abuzz with comment on the expanded range of powers given to the Pensions Regulator (“TPR“) by the Pension Schemes Act 2021 (the “Act“) which are expected to come into force in Autumn 2021. These include imprisonment or unlimited fines for some offences, civil penalties of up to £1 million and enhanced information gathering powers with penalties for non-compliance.
Once the relevant parts of the Act are in force, for the first time, TPR will be able to pursue criminal convictions, in circumstances where action or inaction results in either: 1) the avoidance of an employer debt to a defined benefit (“DB“) scheme, or 2) a material reduction to the chance of members getting their DB benefits in full. And the target can be any “person”, not just the employer or an associated or connected entity (insolvency practitioners are expressly exempted). Some in the pensions industry have raised concerns that normal corporate behaviour could potentially be caught. TPR is keen to dispel such worries and was swift to publish a draft policy and a consultation (which ended on 22 April 2021) on how it plans to use its new powers.
In the accompanying press release, David Fairs (TPR’s Executive Director of Regulatory Policy) commented that “The intent of the new criminal offences is not to change commercial norms or accepted standards of corporate behaviour. Rather it is to tackle the more serious examples of intentional or reckless conduct that puts members’ savings at risk; and strengthen the deterrent and punishment for that behaviour. Our policy is consistent with this intent.”
TPR has also pointed out that, in order for the power to be exercised, there must be intent, an act and the absence of a “reasonable excuse”, which together represent a high bar.
In April, TPR also issued a blog “Time for some perspective on our criminal offences powers” aimed at reassuring employers that TPR “will not overstretch the intent and purpose behind the powers”. In the blog, David Fairs says it is perhaps not surprising there has been some heated debate about the reach and remit of the new powers given the sanctions attaching to them but emphasises that TPR will always take an “appropriate and proportionate approach”. Helpfully, he also says that TPR will not be targeting acts which pre-date the coming into force of the relevant parts of the Act.
The overall message from TPR is that its powers “should not worry those who are doing the right thing and properly thinking through the actions and decisions they take. They should, however, cause a deal of anxiety for those who intentionally want to avoid liabilities or put pension savings at risk.”
Given the significant penalties involved, employers and other parties will nevertheless want to take a cautious approach, especially in the early days of the new regime and seek early advice on any actions or events that might bring them within the scope of TPR’s new powers.