Pensions industry casts doubts over Rudd’s plans to jail company directors

The pension industry has reacted with scepticism to the Secretary of State for Work and Pensions Amber Rudd’s plans to jail company directors who play “fast and loose” with their pension scheme.

Reacting to Rudd’s proposal, industry commentators generally agreed in principle, but said there are “serious doubts” over how easy it will be to establish a framework that will successfully challenge directors’ misdemeanours in a criminal case.

Under the proposals, company bosses face a jail term of up to seven years for allowing the pension deficit to reach unsustainable levels, “or for endangering their workers’ savings through chronic mismanagement”.

Despite Rudd’s tough words on company bosses, outlined in its Government Response to the Consultation on Protecting Defined Benefit Pension Schemes – A Stronger Pensions Regulator today (11 February), she has failed to convince much of the pension industry that any of the changes she has outline will affect serious change.

Barnett Waddingham senior consultant, Malcolm Mclean, said: "There are also serious doubts as to how easy it will be to establish the new criminal offence of “wilfully" or "recklessly“ mismanaging funds.

"These are ill-defined terms which a clever defence lawyer is more than likely to successfully challenge on the “beyond reasonable doubt” test needing to be satisfied in a criminal case."

He added that the required legislation could be “some years away”.

Ashurst pensions counsel, John Gordan, argued that that lack of clarity around criminal offences will cause anxiety in the industry.

“Many directors will wonder what constitutes 'wilful or reckless behaviour in relation to a pension scheme', in the knowledge that, if they get this wrong, they could face a long prison sentence and unlimited fines," he said.

Lincoln Pensions CEO, Darren Redmayne, agreed that the proposals will be “hard in practice”, and reacted to Rudd’s proposals with scepticism.

“In principle, Amber Rudd’s proposals are hard to argue with and probably good politics - trying to show that the government isn’t simply beholden to Brexit issues. However, establishing a clear framework over what constitutes wilful or reckless behaviour in court will be very hard in practice.

Furthermore, the government revealed a package of measures what will allow it to better protect scheme members, including improving TPR’s ability to monitor corporate events, updating its information gathering powers and improving its anti-avoidance powers.

Clyde and Co-head of pensions, Mark Howard, added: “There is more than just the headline criminal offences in the consultation response. The financial support direction regime is being streamlined – might we see TPR taking more cases on as a result?

"The regulator’s information gathering powers are also extended to include the right to require interviews - which would override client confidentiality - and is to be backed up with fixed or escalating (daily) penalties."

The DWP said it will bring forward legislation "as soon as parliamentary time allows" and that it will continue to engage with stakeholders on the proposals.

    Share Story:

Recent Stories

Addressing climate change risk in fixed income portfolios
Francesca Fabrizi meets Lee Clements, director of SRI research at FTSE Russell, to discuss climate change risk in investment portfolios

The modern age
Deputy editor Natalie Tuck chats to the ABI’s Yvonne Braun about her work at the ABI and her thoughts on key pension topics