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Increase punishment for pension scheme mismanagement

The current powers of regulators and the Pension Protection Fund are insufficient to ensure that pension savers, pensioners and prudent company directors are protected from unscrupulous business owners. A Conservative government will act to tighten the rules against such abuse, and increase the punishment for those caught mismanaging pension schemes.

Our Verdict

Between 2014 and 2017, £43 million has been reported as stolen from pensions. Since a lot of pension fraud goes undetected, the actual figure is likely to be a lot higher; some estimates suggest fraudsters could be behind up to £100 million of pension transfers in 2015-16 alone. The government has committed to increase punishment for pension scheme mismanagement.

In the government’s 2018 White Paper Protecting Defined Benefit Pension Schemes, it outlined plans for The Pension Regulator (TPR) to receive a boost to its anti-avoidance powers – powers to act against an employer whose actions compromise pensioners’ benefits. The TPR will be able to;

  • Disqualify company directors who have acted recklessly with pensioners’ funds, and is considering legislation to make such reckless behaviour a criminal offence.
  • Directly impose criminal sanctions for those types of offences as well as the more ‘established’ criminal offences relating to pensions (in the past it could only pass on evidence of illegal behaviour for another public body to apply criminal sanctions). This aims to speed up the resolution of serious cases and minimise the losses incurred by victims of an ongoing pension fraud.
  • De-authorise ‘master trusts’ (pension schemes which multiple employers pay into) that it deems to fail minimum standards.
  • Ask a broader range of inquiring questions of those it demands an interview with, and no-shows to interviews will face fines. Previously, interview absence could only be charged criminally, which was expensive and time consuming; this change gives TPR more flexibility and leverage over those who don’t comply.
  • Inspect records and electronic devices related to TPR regulations; previously inspections could only be carried out on records and devices related to scheme funding compliance, which was much more narrow.
  • Require notification of more types of plans and events (e.g. mergers and other business decisions), and with a stricter timeframe for notification (previously there were circumstances in which TPR would only be informed after the plan was enacted).

This policy is ‘in progress’, and will be marked done when these powers are in place. The white paper itself confirms that “where legislation is required, this is unlikely to be before the 2019-20 parliamentary session at the earliest.” In the meantime we’ll keep tracking this, so follow this policy for updates.

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