Pensions | 'Reckless' bosses who mismanage pensions to face lengthy jail terms

'Reckless' bosses who mismanage pensions to face lengthy jail terms

The government is planning to introduce lengthy jail sentences for executives who recklessly mismanage pension funds – The Guardian reports.

Work and Pensions Secretary Amber Rudd recently explained that a new criminal offence would be introduced to punish “wilful or reckless behaviour” relating to a pension scheme, with unlimited fines and prison terms of up to seven years becoming potential punishments for the worst offenders.

“For too long the reckless few playing fast and loose with people’s futures have got away scot-free,” she said. “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.”

Former Minister of State for Pensions Ros Altmann told HR Grapevine that it is important that the Government and Regulators send a “strong, clear message” to employers and directors that they should try their utmost to fund their pension scheme, rather than trying to find ways not to do so.

“Of course, penalties and jail sentences will be tough to enforce, but having that clear threat is bound to help,” she added. “The aim must be to stop bosses behaving in this way in the first place, rather than locking them up years later.

“There needs to be a more effective deterrent and also tougher action earlier in the process, with the Regulator and Trustees being increasingly vigilant and pro-active in demanding contributions as early as possible.”

It is hoped these deterrents will help to avoid a repeat of recent scandals like BHS or Carillion, which saw laid-off staff pensions schemes entering the Pension Protection Fund, which is described as the government’s ‘pensions lifeboat’.

The Fund, which Altmann helped to establish, pays compensation to members of eligible defined benefit pension schemes, when their former employer has entered insolvency. It currently manages £30billion of assets for 236,000 members.

Rudd added a stern warning for company executives. “If you run your company pension into the ground, saddling it with massive, unsustainable debts, we’re coming for you,” she said.

“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.”

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