We use cookies to support features like login and allow trusted media partners to analyse aggregated site usage.
To dismiss this message and allow cookies to be used, please click "Continue".

Continue

News/Analysis

Twitter board

Follow us
  • As LDI strategies are gradually being replaced by CDI approaches, how are pension schemes managing the additional r… https://t.co/rlMnrBmr1d14 hours ago
  • Friday View: Pension funds challenge corporate climate lobbying - ExxonMobil faces legal action - Pensions minister… https://t.co/nQKGH1YzYD3 days ago
  • Friday View: EMD: Fear of the Fed - GMP ruling to narrow gender gap - UK funds in demand - https://t.co/yyOrkcnxXj https://t.co/St9t8YPNEx10 days ago
  • Emerging market debt is rapidly becoming a local currency market, but investors are still nervous about a US rate r… https://t.co/3coGF5Dq8n11 days ago
  • Have you seen our latest roundtable? We brought fund managers, consultants and trustees together to discuss emergin… https://t.co/BMLta4c9pm14 days ago
  • Friday View: Backing the disruptors – Border to Coast boss on collaboration - TPR and FCA join forces - Treasuries… https://t.co/phYJ07nFNj17 days ago
  • Does the turbulence hitting stock markets at a time of rising bond prices mean it is time to ditch multi-asset fund… https://t.co/GiSdFpE01N20 days ago
  • Friday View: Backing the disruptors – Border to Coast boss on collaboration - TPR and FCA join forces - Treasuries… https://t.co/H7Wf6UHB3D24 days ago
  • More and more pension schemes are increasing their allocations to private equity, but will the illiquid strategy br… https://t.co/8l8TI75r9v26 days ago
  • Border to Coast Pensions Partnership CEO Rachel Elwell tells Mona Dohle about the challenge of developing a common… https://t.co/nQZfFveQdz27 days ago
  • Out now- The portfolio institutional October issue featuring our cover on ESG and fixed income: Breaking new ground… https://t.co/hnmwYclXS528 days ago
  • Friday View: ESG in fixed income: The new frontier - LGPS bolster infrastructure collaboration - EM Roundtable: The… https://t.co/zxvEKaZkoM31 days ago
  • Local government pension scheme (LGPS) pool Border to Coast has appointed the first external managers for its £1.2b… https://t.co/eBAbx0ubzJ31 days ago
  • "Investors seduced by the impressive growth forecasts for emerging market economies should prepare themselves for a… https://t.co/7nAnrL8s7t32 days ago
  • "New RPMI Railpen chief investment officer Richard Williams talks to Mona Dohle about restructuring the scheme’s in… https://t.co/T1Xgvnx6Y435 days ago
  • Friday View: Pension funds turning to smart beta - Europe's fund managers ready for Brexit - Master trust rules rai… https://t.co/wZS8qe41Ci38 days ago
  • "The UK leaving the European Union will have a limited impact of the continent’s fund management industry, a former… https://t.co/tel0BRmGKX38 days ago
  • Pension schemes have had enough of high fees and poor returns. Is smart beta their chance of something better? Re… https://t.co/CzqPANU8D840 days ago
  • Read our latest roundtable where we brought fund managers, consultants and trustees together to discuss diversified… https://t.co/3TRGdybVwX42 days ago
  • Friday View: Lothian's alternative to pooling - Master trusts: The consolidation game - Whistle blower revelations… https://t.co/jbU9tbveK245 days ago

Pensions

DWP proposes £1 million fine for “reckless” DB sponsors

DWP proposes £1 million fine for “reckless” DB sponsors

Mona Dohle
Tuesday 26th June 2018

The Department for Work and Pensions plans to crank up the pressure on employers and trustees of underfunded DB schemes with increased fines, in a bid to strengthen the role of the regulator.

The proposals, revealed today on the DWP website as part of a consultation on the DB Whitepaper include a fine of up to £1m or criminal sanctions for employers  who fail to collaborate with The Pensions Regulator (TPR).

Esther McVey, secretary of state for Work and Pensions comments: “We need to ensure that the Defined Benefit system is tough enough to deal with abuses and continues to work in the best interests of those involved – for members and pensioners, for today’s workforce and for employers”

The proposals target DB schemes who demonstrate “reckless behaviour” and which fail to communicate corporate events which affect the scheme, such as the sale of part of their assets or senior appointments to the regulator. The category of corporate events” does currently not include any obligations for employers with regard to dividend payments in the context of an underfunded DB scheme.

If schemes fail to collaborate, they could face criminal sanctions, including a prison sentence of up to two years.  Under the 1995 Pensions Act, employers could currently face a fine of up to £50,000.

A TPR spokesperson welcomed the initial suggested reforms: “The proposal to enable us to apply a range of sanctions, from administrative penalties to high level fines and criminal charges, for different types of breaches, will provide TPR with a more flexible enforcement framework. It will also help act as a strong deterrent against risky and reckless behaviour which threatens the retirement incomes of workers.”

Malcolm McLean, senior consultant at Barnett Waddingham stresses that key terms of the proposals need to be more clearly defined.

“In particular the proposal to create a criminal offence of ‘reckless’ behaviour towards a pension scheme could prove problematic.  How will legislation define ‘recklessly’ and how will this be interpreted by the courts? It may take a couple of failed prosecutions before we find out” McLean warns.

Steve Webb, director of Policy at Royal London is also cautious: “Threatening to lock people up grabs the headlines which is why this is the third time that it has been announced.  But a criminal offence has a high burden of proof which could mean that the ‘bad guys’ simply get away with it.”

“Even if this measure is included in a Bill in next year’s Queen’s Speech it will be 2020 before it comes into effect and it is doubtful if anyone will ever be convicted.  In the meantime the government has made little progress on the more fruitful area of helping pension schemes to combine to achieve the benefits of scale.  It should be focusing on practical changes that could make a real difference rather than gesture announcements like this” he argues

DWP is now consulting among industry stakeholders for views to specify what behaviours and actions should lead to sanctions. Interested parties can respond through the DWP website until the 21st of August. The results will ultimately be published in a revised Defined Benefits Funding Code of Practice next year.

0

Leave your comment

View our comments policy

Please login or register with us to leave a comment. It's completely free!