The UK government is proposing tough new rules that could see bosses face jail for mismanaging employee pension schemes.
Work and pensions minister Amber Rudd on Sunday announced plans to make “wilful or reckless behaviour” related to pension schemes a criminal offence with a jail term of up to seven years or an unlimited fine.
“If you can’t trust your boss – or your pension company – to take care of your investment, who can you trust?” Rudd wrote in the Sunday Telegraph.
“To curb these freelancers playing fast and loose with your cash, I am going to make ‘wilful or reckless behaviour’ relating to a pension scheme a criminal offence, with jail terms of up to seven years for the worst offenders. We’ll also give the courts powers to levy unlimited – yes unlimited – fines.”
The proposals come after a series of high-profile corporate failures that have left staff facing haircuts on their retirement funds and forced the government to step in and run schemes.
Department store BHS collapsed in 2016 with an estimated funding shortfall of £275m in its pension scheme. The Pension Regulator concluded that former owner Sir Philip Green sold the chain for £1 in 2015 to avoid responsibility for the insolvent pension scheme. Green paid £363m into the fund after its collapse as part of a settlement with the regulator.
Last year construction outsourcing giant Carillion collapsed into administration with a pension deficit of £580m. As with BHS, the government-backed Pension Protection Fund (PPF) was forced to step in and run the scheme.
Tom McPhail, head of policy at stockbroker Hargreaves Lansdowne, said: “In the majority of cases, the regulatory controls of pension scheme funding and the auditing of corporate financial management, do a good job at protecting workers and their pensions. However recent high profile cases such as Carillion and BHS have shown this isn’t always enough.”
Companies across the UK face a combined pension deficit of £210bn, according to PwC. Rising life expectancies and a decade of low interest rates have hit companies running “defined benefit” pension schemes, which guarantee pensioners a certain level of income throughout their retirement.