Criminal Sanctions Proposed: Pensions Regulator Discusses Potential Penalties
The Pensions Regulator (TPR) has published a draft policy on investigating and prosecuting new criminal offences that will be introduced by the Pension Schemes Act 2021, with a focus on breaches such as prohibited employer-related loans in defined benefit (DB) pension schemes. This policy signifies TPR's commitment to enforcing rules strictly, including pursuing criminal prosecution and penalties such as fines, community service, or even jail sentences for trustees, advisers, or others involved in misusing pension scheme funds or flouting investment rules.
Key points about the draft policy and its implications for advisers and others involved in DB pension schemes include:
- TPR is ready to take enforcement action, including criminal prosecution, against those who breach pension scheme rules. This is demonstrated by recent prosecutions of trustees who made prohibited loans from pension schemes to connected employer entities, resulting in suspended jail sentences and financial penalties.
- The policy includes plans to share clear guidance on what constitutes good trusteeship and proper conduct, helping advisers and scheme personnel understand their legal obligations under the 2021 Act and seek to raise standards across the sector.
- The introduction of criminal sanctions and enhanced powers under the Pension Schemes Act 2021 means advisers, trustees, and others involved with DB pension schemes face greater scrutiny and potential personal liability for failing to comply with schemes’ legal and financial rules.
- The approach reflects a broader government and regulator objective to protect savers by ensuring pension scheme decision-makers act prudently and ethically, with TPR signaling zero tolerance for misconduct that risks members’ pensions.
In order to prosecute under either new offence, TPR must prove the absence of a "reasonable excuse" for the action taken. The new criminal offences are expected to come into force later this year. TPR has opened a consultation on a draft policy providing guidance on its approach to investigating and prosecuting the new offences, which is open until 22 April 2021.
It's worth noting that a professional adviser acting in accordance with their professional duties, conduct, obligations, and ethical standards is likely to have a reasonable excuse and would not be committing a criminal offence. Employers, trustees, and many others, including insolvency practitioners, need to start taking the new criminal offences into account when making decisions which affect, or could affect, DB pension schemes.
The pensions advisory industry has collectively breathed a sigh of relief at TPR's statements on potential criminal liability where they are acting within their own professional codes. If you would like to discuss how these changes may affect you, please get in touch with one of our pensions and business crime specialists, or your usual our firm contact. This represents a step-change in regulatory oversight of defined benefit pension schemes.
The draft policy from The Pensions Regulator (TPR) focuses on enforcing strict rules in business, particularly in finance, such as defined benefit (DB) pension schemes, with potential criminal prosecution for breaches like prohibited employer-related loans. This policy also includes sharing clear guidance on good trusteeship and proper conduct to help advisers understand their legal obligations under the 2021 Act, as the introduction of criminal sanctions means they now face greater scrutiny and potential personal liability in finance and business matters.
