TPR's 'vague' criminal sanction powers leaving industry concerned

The pension industry has again called for further clarity from The Pensions Regulator (TPR) regarding its new criminal sanction powers, arguing that the policy will create “very problematic consequences”.

The reaction comes on the final day of the regulator’s consultation on its draft policy outlining how it will use its new criminal sanction powers introduced by the Pension Schemes Act 2021, which commenced in March and has already seen other corners of the industry complain that it could criminalise “normal corporate behaviour”.

Similarly, those reacting to the policy now largely stated that they supported the principles behind it but had issues with the broad scope and vagueness indicated.

PLSA director of policy and advocacy, Nigel Peaple, commented: “While the PLSA is supportive of the underlying objectives of the criminal sanctions regime we believe that the current wording of the policy intent is still too vague and will create very problematic consequences for the pensions community.

“We continue to be concerned that these criminal offences powers will not enable TPR to take timely and meaningful action but will impede normal corporate behaviours and transactions. We are calling on TPR to review and adopt some or all of the principles used by the Financial Conduct Authority (FCA) in their approach to prosecution of criminal cases.”

He requested that TPR consider “adopting the FCA principles related to the seriousness of misconduct, the extent and nature of the loss suffered, the extent to which redress has been provided, the element of cooperation, the degree of dishonesty or abuse of position of authority, and that account be taken of the personal circumstances of the prosecuted party”.

These concerns were echoed by Hymans Robertson head of corporate defined benefit, Alistair Russell-Smith, who said his primary worry was that the new powers “appear wide and on the face of it would capture routine corporate activity”.

He continued: “Practical cases will take a while to develop so in the meantime expanding guidance from TPR to cover actions and considerations that it would expect from companies as part of its decision making to support a view that there is a reasonable excuse for the act would be helpful.

“One area where we think more clarity could be provided is the steps a company should take to conclude that they have a 'reasonable excuse', e.g. what is the order of events, how should decisions be made and documented.

“Finally, the fundamental new legal powers from Pensions Act 2021 remain potentially wide-ranging. Whilst the policy gives comfort on how TPR will respond in the short term, it does not remove the risk for corporates that the legal powers will be enforced far more heavily or in a more wide-ranging fashion in the future.”

The Association of Consulting Actuaries (ACA) listed its problems with the proposals, stating that the criteria for selecting cases for investigation was too widely drafted, the “reasonable excuse” guidance casts doubt on whether many typical business activities – such as payment of dividends – would satisfy the statutory exemption and calling for a tightening of the guidance.

The organisation warned that failing to act on these recommendations could result in discouraging people from becoming trustees, discouraging guarantees from parent companies and stifling innovation for defined benefit schemes.

ACA chair, Patrick Bloomfield said: “We accept government’s intent to give TPR new powers, but a lack of clarity on the circumstances in which the powers could be used will have important unintended consequences for the schemes, their sponsors and the wider pensions industry. 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.”

He added: “We encourage 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. The ACA has written a joint letter with other industry bodies, making this point to the Minister for Pensions and Financial Inclusion.”

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