Company directors and senior executives have a legal and moral duty to safeguard pension funds and of course, the vast majority do just that. However, with the recent announcement from Amber Rudd (Work and Pensions Secretary) of government plans to jail bosses for up to seven years if they ‘wilfully or recklessly’ mismanage pension schemes, some may be worried about what that means for them.
Rudd has been quoted as saying: “For too long the reckless few playing fast and loose with people’s futures have got away scot-free. Acts of astonishing arrogance and abandon punished only with fines, barely denting bosses’ bank balances. Meanwhile, workers who have done the right thing and saved for retirement, confident their investments were safe, are left facing a leaner later life. That cannot be right, which is why, for the first time, we’re going to make wilful or reckless behaviour relating to pensions a criminal offence.”
The proposed new measures come after the government consulted on giving tougher powers to The Pensions Regulator (TPR) after the collapse of the BHS and Carillion pension schemes. While the announcement has made for great press headlines – how would this work in real terms?
Ms. Rudd herself has made it clear that the law would only apply to the ‘reckless few’ and of course defining and proving wilful and reckless behaviour in a court of law could be difficult to do as prosecutors would have to show burden of proof. It will be interesting to see when the first case is eventually brought how this develops and what the final outcome is.
Frank Field MP who chairs the work and pensions committee, has never been one to hold back with his fury against the likes of Philip Green and he has praised the new proposals and wants them applied retrospectively. He said:
“Retrospection in the law is usually to be avoided, and for good reason. But the actions of greedy bosses like those at BHS and Carillion have torn apart thousands of people’s plans for the future. In such exceptional circumstances shouldn’t the long arm of the law be able to reach into the past, to gain justice for those who have lost so much?”
Certainly, all government and regulatory objectives to safeguard members’ interests have to be applauded and what is becoming increasing clear to us is that the value of Trustees and their professional advisers has never been so important to schemes of all sizes. As part of their role, Trustees should not be scared to raise any concerns that they have regarding the running of their schemes with TPR – although we fully appreciate that many may be reticent to do so, especially if their ‘day job’ is gainful employment with the sponsor. The appointment of a professional and completely independent trustee would negate this potential conflict, but a company that is truly hell bent on mismanagement of their scheme is unlikely to sanction such a move…
Rudd has warned “If you gamble your employees’ futures on risky investments that put a pension scheme at risk, we’re coming for you. And if you chronically mismanage a pension scheme and it goes under, we’re coming for you.”
Fighting talk from the government, and long overdue in our opinion.