The pensions industry has welcomed the draft policy on The Pensions Regulator’s (TPR) new criminal sanction powers introduced by the Pension Schemes Act 2021, although concerns were raised around the amount of detail included.

The guidance, published on 11 March, set out how the regulator plans to use its new criminal powers to investigate and prosecute those who avoid employer debts to pension schemes or put savers’ pensions at risk, and will be subject to a consultation launched by TPR.

Laying out the objectives of the guidance, Pensions Minister Guy Opperman said: “I welcome TPR’s guidance on how it will use the new criminal powers introduced through the Pension Schemes Act. I hope the guidance gives clarity and reassurance to the industry.”

Sackers partner, Peter Murphy, also welcomed the guidance and stated that it was reassuring that the “new offences are not intended to give rise to a fundamental change in normal commercial practice or accepted standards of corporate behaviour in the UK”.

However, he continued: “The examples of behaviour set out in the draft policy help to reinforce this intended approach. But they provide little detail, and judicial consideration of the existing anti-avoidance powers is limited.

“So, while it might allay fears around the more incidental consequences on affected pension schemes, there will still be a lot of shades of grey and I expect the new criminal offences will result in more cautious corporate behaviour where the legal position is not so clear.”

“It is also important to note that TPR is not the only one in the driving seat when it comes to the new criminal offences. Both the Secretary of State and the Director of Public Prosecutions could initiate a prosecution and TPR’s approach will not tie their hands.”

Pensions and Lifetime Savings Association (PLSA) deputy director, policy, Joe Dabrowski, reacted similarly, noting that it was “welcome that the regulator has set out how it intends to interpret the law” and that it was “seeking a discussion with industry on how to provide greater certainty”.

He continued: “The examples included in the guidance are a helpful starting place. We will be talking to our members about whether they are suitable and whether they go far enough. What the draft policy does not, and cannot, address is the key issue of the ‘unknown unknowns’ - the potential for unintended consequences, and any future interpretations of the legislation by the courts.

“Even in the best-case scenario this will generate substantial extra, and probably unnecessary, compliance overheads.”

Dalriada Trustees professional trustee, Keith Hinds, was more positive about the newly released guidance, stating that he hoped it would “make those who would be tempted to purposely avoid a scheme liability or materially detrimentally affect member benefits think twice before undertaking or advising for such a transaction”.

Speaking generally about the purpose of the proposals, he added: “It should not act as a deterrent to good commercial practice and still allow employers to run their businesses in a commercial, customer facing and efficient manner with the capacity to undertake merger and acquisition activity.

“Given that the sanctions are criminal in nature it is only right that the burden of proof is on the prosecution to prove absence of a reasonable excuse, compared to that of a contribution notice where the onus is on the defendant to establish a statutory defence.

“Overall, it should encourage earlier and more wholesome engagement between employers and trustees with regards to corporate activity. As ever the devil will be in the detail, and ultimately interpretation of what is reasonable in the context of these new powers may end up being left to the courts to decide.”

Previously, the industry has expressed concern that the new powers could make pension professionals "very nervous" about taking action when employers were struggling, which in turn led to worries that essential work to help pension schemes could go undone.

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