Amber Rudd, the work and pensions secretary, said the current fines were not enough and that a new criminal offence would be introduced to punish wilful or reckless behaviour relating to a pension scheme, threatening unlimited fines and prison terms of up to seven years for the worst offenders.
Rudd will tell parliament on Monday that the new measures show that the Conservative government is on the side of workers saving for retirement and that we will protect their incomes from reckless behaviour.
More than 10 million people are now enrolled in workplace pension schemes.
Rudd, a former JP Morgan banker and business executive, said: For too long the reckless few playing fast and loose with people’s futures have got away scot-free. Acts of astonishing arrogance and abandon punished only with fines, barely denting bosses bank balances.
“Retrospection in the law is usually to be avoided, and for good reason. But the actions of greedy bosses like those at BHS and Carillion have torn apart thousands of people’s plans for the future. In such exceptional circumstances shouldn’t the long arm of the law be able to reach into the past, to gain justice for those who lost so much?”
Tom McPhail, head of retirement policy at investment service Hargreaves Lansdown, also welcomed the new measure, but called for defined contribution schemes to be included.
“After all, if wilfully underfunding a defined benefit pension scheme becomes a criminal offence, why not defined contribution schemes too? We know typical contribution rates to these defined contribution schemes aren’t sufficient to fund a decent retirement for many employees.”
McPhail warned that the new criminal offence could have knock-on effects, such as putting greater pressure on the dividends of companies with large pension deficits, which could impact their share prices.
BHS, the retail chain formerly owned by Sir Philip Green, collapsed into administration in April 2016 with a £571m pension fund deficit. He had sold the chain a year earlier for £1.
The billionaire later agreed to pay £363m into the pension fund in a settlement with the pensions regulator, which found that Green’s “main purpose” in selling the department store was to avoid taking on liability for the scheme.
“Meanwhile workers who have done the right thing and saved for retirement, confident their investments were safe, are left facing a leaner later life. That cannot be right, which is why, for the first time, we’re going to make wilful or reckless behaviour relating to pensions a criminal offence.