Criminal offences: Industry wants clearer guidance
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Three industry associations have said they need clearer guidance from the Pensions Regulator on how it will interpret the wide-ranging paragraphs on criminal sanctions in the Pension Schemes Act, including what it would see as a ‘reasonable excuse’, as a consultation on TPR’s approach is closing.
The newly introduced criminal offences, which attract up to seven years in prison, and new civil fines of up to £1m, have led to protests and complaints from the pensions industry. The law’s wording means that anyone involved with a pension scheme can be held culpable for actions that puts accrued benefits at risk, without a limitation period, although there needs to be intent.
A recent blog post David Fairs, TPR’s executive director of regulatory policy, analysis and advice, which sought to reassure the industry about the new powers, has seemingly failed to calm nerves.
The consultation closing today and launched only six weeks ago attracted responses from the Association of Consulting Actuaries, the Employer Covenant Practitioners Association and the Society of Pension Professionals among others, which demand much more clarity on what would be an offence - and what would be seen as a 'reasonable excuse'.
ACA writes joint letter to Guy Opperman
The Association of Consulting Actuaries said it accepts the high-level policy intent to protect pension schemes, but that more clarity is needed in TPR’s policy "to limit the risk of adverse unintended consequences, given the very significant penalties involved and the wide range of individuals potentially in scope of the new powers".
ACA chair Patrick Bloomfield said: “There is concern that the powers could be used in a wide range of circumstances and it is not certain where the line will be drawn.”
Bloomfield said the ACA encourages the regulator to work with the other authorities who have powers to prosecute these offences, to reassure industry that prosecution will not take place in circumstances other than those set out in TPR’s policy, and has written a joint letter with other industry bodies making this point to pensions minister Guy Opperman.
The ACA said in its consultation response that the criteria for selecting cases for investigation are too widely drafted, and that the 'reasonable excuse' guidance "casts doubt on whether many typical business activities – such as payment of dividends – would satisfy the statutory exemption".
It said lack of clarity in the details will impact behaviours and lead to unintended consequences, such as contribution payments being deferred, so they can count as 'mitigation' at a later date. It would discourage guarantees from parent companies or investment in companies that sponsor UK pension schemes and stifle innovation for DB schemes generally, it argued.
Guidance does not give 'sufficient comfort' to industry
ECPA also believes that despite the latest guidance, the law could capture normal corporate behaviour. When the new offences were introduced, 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, said Andy Palmer, chair of ECPA.
The legislation is however so widely drafted such that normal corporate behaviour could be deemed an offence; and the regulator’s draft guidance does not give “sufficient comfort that legitimate corporate behaviour or accepted commercial practices will not be prosecuted”, he argued.
The examples in the guidance are ones that clearly fall into either the legitimate or criminal category, but there is little to guide the industry on areas that are less obviously one or the other.
“Greater clarity could be achieved by the use of additional examples to reduce the grey areas, leaving less to interpretation and bringing indictable behaviour into sharper relief,” he said.
TPR not the only authority that can prosecute
The Society of Pension Professionals has echoed these concerns, noting that the examples given by TPR are extreme scenarios; in addition, it argued that the policy did not adequately distinguish between conduct giving rise to criminal sanctions and conduct giving rise to civil liability.
What will count as a “reasonable excuse”, which the law provides for, should also be explained in a practical context, the SPP said, asking for the regulator “to provide reassurance that trustee actions taken in good faith will not result in prosecutions”. In the consultation, the regulator said that “what constitutes a reasonable excuse will be case-specific and ultimately determined by the courts”.
TPR also notes that it is not the only prosecuting authority in respect of these offences, and that the policy only applies to its own actions. The Crown Prosecution Service could for example also press charges in relation to the offences contained in the new Pension Schemes Act.
Christopher Stiles, a member of the SPP's legislation committee, said successful prosecutions and effective deterrence would be more likely if the policy were clearer on what behaviour is now considered to be criminal.
“This clarity would not only protect the innocent, but also better serve the interests of pension scheme members,” he argued.
What are your thoughts about TPR’s guidance on its approach to criminal offences?