The collapses of BHS and Carillion alone left a hole of over £1 billion missing from employees’ pension funds. ‘Mismanagement’ of this nature and scale is something the government wants to crack down on, so is “considering” (i.e. making a decision either way) whether this should be a criminal offence as opposed to a civil offence. If it is a criminal offence, perpetrators could face a prison sentence rather than just fines or restrictions on their business practices.
In the government’s 2018 White Paper ‘Protecting Defined Benefit Pension Schemes‘, it outlined plans to increase powers for The Pension Regulator (TPR) to act against an employer whose actions compromise pensioners’ benefits. Specifically, the TPR will be able to disqualify company directors who have acted recklessly with pensioners’ funds. It is this “reckless” behaviour that is being considered as a potential criminal offence.
After a further review, the government announced in February 2019 that the maximum sentence for pension mismanagement would be increased from two years in prison to up to seven years. So clearly criminal action is the route the government wishes to take – at least for “the reckless few”.
While the decision to criminalise this offence faces some criticism (due to being harder to purse than civil offences) and is not yet law, the government has fulfilled its promise to “consider” criminalising pension fund mismanagement. We’re marking it as ‘done’. The debate as to whether criminal or civil action is more effective is an interesting one, so have your say in the comments below.
‘Consider’ the detail…
- Pensions: Tougher jail terms for mismanaging funds – BBC
- Protecting defined benefit pension schemes – a stronger Pensions Regulator – Gov.uk
- Protecting Defined Benefit Pension Schemes – Gov.uk
- The Pensions Regulator