Pensions industry concerned about criminalisation of 'normal corporate behaviour'

The Pensions Regulator’s (TPR’s) draft policy on its criminal sanction powers is still too wide ranging and risks criminalising “normal corporate behaviour”, according to industry responses.

Responding to the regulator’s consultation on proposals for the investigation and prosecution of new criminal offences introduced by the Pension Schemes Act 2021, the Employer Covenant Practitioners Association (ECPA) said they supported the intentions behind the legislation but called for more clarity.

ECPA chair, Andy Palmer, said: “When the new offences were introduced by the Parliamentary Under-Secretary of State it was stated that the intention of legislation was 'to punish those who wilfully or recklessly harm their pension scheme', but not to 'stop legitimate business activity'.

“The ECPA remains wholly supportive of this objective. The legislation is however so widely drafted such that normal corporate behaviour could be deemed an offence. It is the view of the ECPA that the guidance from TPR still does not provide enough clarity as to how TPR will ensure that only the worst offenders are charged with the offences.”

Additionally, he argued that the guidance did not “give sufficient comfort that legitimate corporate behaviour or accepted commercial practices will not be prosecuted” and called for the regulator to increase clarity by using “additional examples to reduce the grey areas”.

Palmer’s views were largely reflected by the Society of Pension Professionals (SPP), which stated that the proposals did not adequately distinguish between conduct giving rise to criminal sanctions, which it said should be reserved for the most serious misconduct, and conduct giving rise to civil liability.

SPP legislation committee member, Christopher Stiles, called the criminalising of intentionally or recklessly putting savers pensions at risk “commendable” but adding that the range of conduct that fell under the scope of new offences was “far wider”.

He commented: “Successful prosecutions and effective deterrence would be more likely if the policy were clearer on what behaviour is now considered so unacceptable as to be criminal. This clarity would not only protect the innocent, but also better serve the interests of pension scheme members.”

Consequently, the SPP called for an explanation of how TPR will interpret and apply the concept of 'reasonable excuse' in a practical context when deciding what cases to prosecute, as well as examples to help employers determine which side of the line conduct would fall in difficult situations.

SPP legislation committee member, Nick White, worried that the lack of certainty might create an confusion around some corporate decisions and mean that “some genuinely legitimate transactions” might be stopped.

He continued: “We believe both the regulator and the wider pensions community would benefit from clearer guidance about what behaviour might lead to prosecution and what is considered legitimate commercial activity."

TPR executive director of regulatory policy, analysis and advice, David Fairs, published a blog earlier this week, stating that the regulator would not "overstretch the intent and purpose behind the powers”.

    Share Story:

Recent Stories

Opportunities within asset-backed securities
Pensions Age Editor, Laura Blows, speaks to AXA Investment Managers Alts Co-Head of Securitised & Structured Assets, Christophe Fritsch, and Senior Portfolio Manager for Structured Finance, Xavier Lassau, about the opportunities within asset-backed securities
Alternative credit
Pensions Age editor, Laura Blows, is joined by Royal London Asset Management fund manager, Diversified ABS Fund, Shalin Shah, to talk about the opportunities in asset-backed securities.