New criminal offences relating to UK defined benefit pension schemes have come into force.
They will apply to anyone whose intentional or reckless conduct puts members’ savings at risk. This includes any person - company directors, lenders, investors, trustees and advisors - who avoid paying pension debt or is responsible for actions which are detrimental to a defined benefit pension scheme.
They are expressed as any person whose actions detrimentally affect, in a material way, the likelihood of accrued benefits under a defined benefit occupational pension scheme being received; that the person knew or ought to have known that it would have that effect and that the person did not have a reasonable excuse for their act, failure or for engaging in that conduct.
The highest profile of the range of regulatory powers and sanctions are three new criminal offences - and alongside these, the Pensions Regulator has been given power to impose fines of up to £1 million in a range of circumstances; enhanced power to require defined benefit sponsors and related parties to make immediate payments into their scheme and to extend information gathering powers.
It is expected that any prosecution would be instigated by the Pensions Regulator. However, a prosecution may also be brought by other persons or bodies - including the Secretary of State for Work and Pensions and the Director of Public Prosecutions.
There is no time limit on when the Regulator can bring a prosecution for these new offences - unlike its power to issue contribution notices which it can only exercise for up to six years after a relevant act or failure.
A criminal prosecution can also be brought against any person who assists with the commission of a relevant act or course of conduct.
As with the criminal offences, there is no time limit on when the Regulator can impose a fine under these new powers. However, depending on the circumstances, it may be easier for the Regulator to impose a civil fine on a person - as opposed to securing a criminal conviction - on the basis that a civil penalty is subject to a lower standard of proof.
In April 2022, the government is planning new reporting requirements in relation to certain material corporate transactions and the granting of security. This will mean that organisations will probably be required to notify the Regulator - and their scheme’s trustees - about such transactions at an earlier stage.
