'Disappointing lack of scrutiny' on criminal offenses outlined in Pension Schemes Bill - Freshfields

There has been a “disappointing lack of scrutiny” from the House of Commons into new criminal offences included in the Pension Schemes Bill, according to Freshfields Bruckhaus Deringer.

The law firm noted the government had acknowledged pensions industry concerns that “the extremely broad scope of the new offences will disrupt ordinary business activity", with the government reiterating that action would only be pursued where the party in question had no “reasonable excuse”.

Freshfields stated: “It is clearly unsatisfactory that companies and individuals will have to rely on such an uncertain concept as 'reasonable excuse' when trying to work out whether particular corporate actions could result in serious criminal liability.”

The government has indicated that The Pensions Regulator (TPR) will supply guidance on what constitutes “reasonable excuse”, but Freshfields said it was hard to see how the regulator would be able to provide the reassurance the industry is in need of “given the tremendously wide range of circumstances in which the new criminal offences could theoretically bite”.

TPR will be launching a consultation into how it should provide guidance on the new rules and penalties included in the Pension Schemes Bill.

In its current form, the bill would make acting in a manner that could have a “materially detrimental effect” on a defined benefit (DB) pension scheme or preventing the recovery of employer debt due to a DB scheme criminal offences carrying a maximum penalty of seven years in prison.

Freshfields warned: “There is a significant risk that, instead of protecting DB schemes as the government intends, the bill could have the opposite effect if pension scheme liabilities become a blocker for corporate activity, with the difficulty being most pronounced in distressed situations – a particular concern in view of the financial difficulties in which many companies now find themselves due to the pandemic.”

Having gone through its second reading in the House of Commons on 7 October, the Pension Schemes Bill will now move on to the committee stage and could see further amendments before being passed into law.

Pensions Minister, Guy Opperman, said that the bill would “revolutionise” the UK pension landscape and herald a “safer, better and greener system”.

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