PLSA AC 2020: Criminal offences outlined in PSB will make industry ‘nervous’ to take action

New criminal offences outlined in the Pension Schemes Bill (PSB) will make professionals in the pensions industry “very nervous” about taking action when an employer is struggling, Pinsent Masons partner, head of pensions and long-term savings, Carolyn Saunders, has warned.

Speaking on the PSB the PLSA Annual Conference 2020, Saunders cited concerns that broad definitions of who may fall foul to the criminal sanctions in section 107 of the bill will create “unwelcome and unintended consequences”.

The offences will criminalise actions that result in the avoidance of an employer debt or that materially affect the likelihood of accrued scheme benefits being received by members without ‘reasonable excuse’.

“Just at a time when we are anticipating that many employers will be in financial difficulty, we will be looking for creative solutions to support those employers and their pension schemes,” Saunders continued.

“The spectrum of these criminal offences is going to mean that employers, trustees, professional advisers and third-parties, for example banks who are refinancing the employer, are all going to be very nervous about taking action.

“That may mean that things that should be done to help the employer’s help the pension scheme won’t get done.”

Saunders also warned that the sanctions, in some cases, could damage the relationship between trustees and the employer, as the trustees could be seen as being uncooperative when, “very sensibly”, they are protecting their position and the position of the employer.

Furthermore, the new offences could conflict with the government’s Corporate Governance and Insolvency Act, designed to give companies more flexibility when they are in distress.

“The point was made in the House of Lords that things that are legitimate under the Corporate Governance and Insolvency Act could well be criminal offences under the Pension Schemes Bill,” Saunders added.

“The result, I think, of all of this is that it potentially undermines the underlying policy intent of the bill, which is to protect DB members and their benefits.

“In summary, there is a place for the criminal sanctions, but they need to be properly focused and if they are not, they will do more harm than good.”

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