Pensions lawyers and advisers express concerns over ‘ambiguities’ on new criminal sanctions

Following the publication this month (11th March) of the Pensions Regulator’s consultation on how it will use new criminal powers in the Pensions Schemes Act 2021, pensions lawyers and advisers have expressed concerns about how far the new powers will be applied retrospectively.

When the idea of a criminal sanction was first mooted several years ago, the impression was given by politicians that some or all of the powers might apply to behaviour before the legislation was brought into force. In particular, the White Paper issued on 19 March 2018 (Protecting Defined Benefit Pension Schemes) said:

“To ensure members of Defined Benefit schemes are protected as far as possible and to deter activity that puts the security of members’ benefits at risk, we will examine the feasibility of the penalty regime applying in respect of acts or omissions prior to enactment, in particular, after the date this document is published.”

However, more recently, and with the passage of the Bill through Parliament, Ministers and regulators had made it very clear that they did not expect the new criminal sanctions (and new Contribution Notices) to take account of things that happened before the Act received Royal Assent. For example, the Pensions Minister was asked a written question in Parliament and replied on 11th January 2021 as follows:

“Subject to Parliamentary processes, the Pension Schemes Bill should gain Royal Assent in due course. The Pensions Regulator will be producing guidance on the use of the new criminal sanction powers and it plans to undertake a consultation first with industry to ensure these vital views are captured. There are also other powers in Part 3 of the Bill that require implementing regulations and the aim is for these powers to be available to the Pensions Regulator by autumn 2021. None of the provisions in Part 3 of the Bill will be retrospective and the new criminal sanctions and information gathering powers will apply to all schemes where the act occurs, or in the case of a series of acts commences, after the powers come into force”. (Hansard, 11th January 2021, Written Answers);

But the most recent TPR consultation calls this commitment into question. It suggests that the new criminal powers might come into force on 1st October 2021 but then says:

“Evidence pre-dating [commencement date - 1 October 2021] may be relevant to our investigation/prosecution of actions after that date, for example if it indicates someone’s intention” (See: Draft policy investigation prosecution criminal offences | The Pensions Regulator).

The language of the latest TPR consultation does not even imply that TPR would only look back to the date of Royal Assent of the Pension Schemes Act in February 2021 but could go back even further. This creates considerable uncertainty for pensions schemes, advisers, sponsors and anyone involved who may be caught in the scope of these new, much wider powers.

Rosalind Connor, Managing Partner at Arc Pensions Law said:

“The question of retrospectivity continues to cause real uncertainty around the criminal offences. When the idea of a new criminal offence was first mooted, ministers seemed to imply that it might cover acts and omissions from the date of the White Paper, but as recently as January 2021 ministers were quite clear that the new powers would not apply retrospectively. Although the guidance isn’t looking at the “offence” itself retrospectively, in practical terms TPR is suggesting that what has already happened may be a driving force for the use of its powers, which might be considered just retrospectivity by another name”.

Laura Amin, principal at LCP said:

“No-one wants to protect people who purposefully set out to undermine pensions, but the legal position does need to be clear so that all parties involved with a scheme know where they stand and the risks they face. The latest TPR guidance opens up the possibility of an open-ended investigation into past actions by companies, advisers and Trustees, all of which could be used to support a criminal prosecution. It is vital that when the guidance is finalised this ambiguity is removed and that the commitments made in Parliament by ministers that these powers will not apply retrospectively are honoured”.