TPR launches criminal sanction powers consultation

The Pensions Regulator (TPR) has launched a consultation on its draft policy outlining how it will use its new criminal sanction powers introduced by the Pension Schemes Act 2021.

The guidance, published today (11 March), sets 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.

TPR confirmed that the onus will be placed on the prosecution to prove that the accused did not have a “reasonable excuse”, clarifying however, that this does not mean that the prosecution must identify and disprove "every possible excuse open to someone".

Instead, the regulator has highlighted three key factors which it will view as "significant" in defining what constitutes a reasonable excuse.

This includes whether the detrimental impact on the scheme was an incidental consequence of the act or omission, as opposed to a fundamentally necessary step to achieve the person’s purpose, and the adequacy of any mitigation provided to offset the detrimental impact.

Where there was no, or inadequate, mitigation, it will also consider whether there was a viable alternative which would have avoided or reduced the detrimental impact.

The two new criminal offences introduced in the Pension Schemes Act 2021 were the offence of avoidance of employer debt and the offence of conduct risking accrued scheme benefits.

Whilst these are not in force yet, the regulator has confirmed that they are expected to be by Autumn 2021.

TPR stated that the two offences outlined in the draft policy will be committed if someone acts, or fails to act, with the relevant intention, or if someone aids or procures another person to do this, and does not have a "reasonable explanation" for their behaviour.

In particular, the offence of avoidance of employer debt can apply to anyone who prevents the recovery of the whole or any part of a debt due to the scheme under section 75 of the Pensions Act 1995, prevents such a debt becoming due, compromises or otherwise settles such debt, or reduces the amount of such debt.

An offence of conduct risking accrued scheme benefits, meanwhile, can apply to anyone who does an act or engages in a course of conduct that detrimentally and materially affects the likelihood of members receiving their accrued scheme benefits.

The guidance stated: “We expect those we investigate to explain their actions and put forward sufficient evidence of any matters that might amount to a reasonable excuse and will give them the opportunity to do so.

“We expect the basis for the reasonable excuse to be clear from contemporaneous records such as minutes of meetings, correspondence and written advice."

The consultation closes on 22 April 2021, following which TPR will review all responses and make any appropriate changes before publishing the final policy later this year.

It is the first in a series of consultations the regulator expects to undertake as it proceeds with the plans outlined in the Pension Schemes Act 2021.

The new criminal offence powers were highlighted by TPR executive director of regulatory policy, David Fairs, as part of a "strong package of measures" which will enhance its existing avoidance powers and support the objective of protection pension savers.

He continued: “The intent of the new criminal offences is not to change commercial norms or accepted standards of corporate behaviour.

"Rather it is to tackle the more serious examples of intentional or reckless conduct that puts members’ savings at risk; and strengthen the deterrent and punishment for that behaviour. Our policy is consistent with this intent.

"It is important our approach is clear and understood, and so I call on industry to take part in the consultation as we finalise our policy.”

Fairs added: “We appreciate the industry’s interest in our intended approach to investigating and prosecuting people under these new offences and the desire for clarity.

“The policy discusses in detail the points of similarity and differences with our existing anti-avoidance powers and provides examples of the types of behaviour that could fall within the scope of the new offences.”

Pensions Minister, Guy Opperman, commented: “I welcome The Pensions Regulator’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.”

Industry experts have previously raised concerns around the new powers, with a recent survey from Sackers revealing that 40 per cent of trustees and employers and mildly concerned, whilst 17 per cent were very or extremely concerned, despite confirmation that the powers will not apply retrospectively bringing reassurance to some.

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