Are you worried that your pension won’t be there for you in full when it comes to retirement? It’s not completely unfounded, as company directors have previously taken advantage of their employees’ pensions. But since the introduction of The Pensions Regulator (PTR) in 2005 there has been legislation introduced to curb any wrongdoing and ensure pensions are honoured in full.
This does not constitute advice and advice should be sought in all instances before acting on it.
While this has certainly helped, it hasn’t stopped employers from not properly funding pensions, leaving staff and former employees in the lurch after their business crumbles. Directors are still paying themselves bonuses and dividends and avoiding their duty to provide for their employees.
What is the Pension Schemes Act?
After receiving Royal Assent earlier this year, as of 1 October, the Pension Schemes Act (PSA), which promised tough new penalties for pension crimes, officially came into play.
The PSA gives The Pensions Regulator the power to fine and prosecute people and companies who recklessly or intentionally act in a way that threatens the interests of scheme members. Additionally, the scheme added defined benefit (DB) scheme funding requirements, made changes to transfer rights, introduced new climate change risk governance requirements, and added a legislative framework for collective money purchase pension schemes.
PTR enforcement capabilities
The main element of this new scheme is the introduction of criminal offences which have the possibility of resulting in up to seven years in prison and/or an unlimited fine:
- Avoidance of a statutory employer debt
- Conduct risking accrued scheme benefits.
These apply to anyone involved which opens up the pool of potentially culpable individuals. So, it’s not just employers that could be held responsible for foul play. Anyone from trustees to banks lending to the employers, and professional advisers to investment counterparties.
These apply to anyone involved which opens up the pool of potentially culpable individuals. So, it’s not just employers that could be held responsible for foul play. Anyone from trustees to banks lending to the employers, and professional advisers to investment counterparties.
Increased accountability
Widening the pool of people that could be fined or prosecuted isn’t being met favourably by everyone, though. Some claim that previous pension scandals might not have been caught if these rules had been in effect before. But the goal of opening up liability to any party involved in pension crimes is to increase accountability and introduce more checkpoints to ensure all operations are above board.
As anyone can be held responsible, trustees should make more assertive demands around market transactions, internal restructuring, and scheme funding. Companies eager to restore dividends after the pandemic might need to pause and evaluate their plans to make sure they are complying with the tougher regulations. Banks whose first thought is to call in a loan after a company breached their covenants might reconsider pursuing other options first.
Pension advice
Could these new changes affect you, either as an employer or employee? If you’re uncertain about what the Pensions Schemes Act and the increased powers of The Pension Regulator mean for you, get in touch with us. We can you understand your pension plan, as well as your complete retirement plan, and look at the best options for you.
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