Rosalind Connor and Anne-Marie Winton were interviewed by Barbora Kozusnikova from Lexis Nexis UK and discussed the Pension Regulator’s (TPR’s) draft policy document on its use of the new criminal powers introduced by the Pension Schemes Act 2021 (PSA 2021), how TPR plans to use these powers, and what the proposals in the draft policy document would mean for pension schemes.

In relation to what the policy indicates about TPR’s approach to its powers under the PSA 2021 and to criminality generally, how TPR plans to use these criminal powers and whether they raise any specific problems or issues, Rosalind and Anne-Marie commented:

“TPR is keen to assure us that it is not expecting the offences and the use of its powers to change behaviour, and that it sees the use of this power to be in similar circumstances to its existing powers to issue contribution notices (which demand payments into a pension scheme by group companies and directors).

“However, it does go on to acknowledge that these powers are wider, and can be issued against people unconnected with the pension scheme employer, and also that they would be employed in circumstances where a contribution notice would be discounted because the expected return was so low.

“The guidance is generally broadly drafted. Assurances that might indicate the limits of the use of TPR powers are caveated and examples given of behaviour that is or is not acceptable does not give great detail of the approach. The breadth of the criminal offences has constrained attempts that TPR might otherwise make to give great clarity to when its powers may or may not be used.

“TPR is advocating that businesses take into account pension liabilities in making decisions. The indication is that, so long as the pensions creditor is considered appropriately in its actions, TPR would not be minded to use its powers. However, TPR cannot clearly define what ‘appropriately’ means, so a clear pathway cannot be drawn for businesses.”

When asked how would the introduction of TPR’s proposed approach impact on pension schemes and their sponsors, and corporate activity generally and what steps can and should employers and other parties be taking now, in light of this prosecutions policy, to avoid exposing themselves to the risk of corporate criminal prosecution, they further commented:

“The guidance should give some comfort about the way TPR is approaching its new powers. In particular, it is not expecting to focus on different issues from the ones it considers to date, such as the engagement with the trustees and TPR, the ‘fair’ treatment of the pensions creditor compared to other creditors, or the importance of considering the pension scheme when funds are available for a business to use.

“However, the guidance is clearly linked to the policy intent behind the legislation which is to broaden the powers of TPR and allow them to be used in circumstances which are not clearly defined in advance.

“As such, the guidance is unable to limit the breadth of the powers and in particular the risk that the criminal sanctions will discourage investment in and trading with businesses with defined benefit pension plans, which, ironically, may lead to less strong employers of pension plans and lower security for pension scheme members.

“The guidance itself will not guarantee protection from the risk of criminal prosecution, which given its breadth, can apply to anyone who interacts with the employer of a defined benefit pension scheme.

“However, there are a number of things that can be done to provide protection. Considering the pension scheme and the effect on it at an early stage of any interaction is very useful and, where an action is likely to negatively affect the pension scheme, thinking about and setting out why it is reasonable to do will provide a lot of protection.

“Existing good practice of engaging early with the pension scheme’s trustees and, where appropriate, TPR, will continue to provide the best protection from the use of TPR’s powers.”

This interview was first published by LexisNexis UK. To read the full interview (behind paywall), please click here.