Responding to The Pensions Regulator’s consultation on its proposed approach to investigating and prosecuting the new pensions criminal offences, Rachel Pinto, pensions partner at Herbert Smith Freehills, says that “the draft policy contains mixed messages and leaves unnecessary uncertainty over when the new offences will apply.”
In its response, Herbert Smith Freehills notes that serious concerns have been expressed across the political spectrum and by many both within and outside the pensions industry about the scope of the new pensions criminal offences and their potential impact on corporate activity. Commenting on the Regulator’s attempts to clarify the scope of the offences, Pinto says:
“While we welcome the attempt to clarify the scope of the criminal offences due to be introduced this Autumn, there remains too much uncertainty. On the one hand the policy indicates that the new offences are aimed at the most serious intentional or reckless conduct and that they are not intended to achieve a fundamental change in commercial norms or accepted standards of commercial behaviour in the UK. However, at the same time, it fails to give unequivocal assurance that an entity that has fully mitigated any detriment to its scheme or that has obtained clearance from the Regulator will not be prosecuted. This creates unnecessary uncertainty.”
Highlighting how a number of examples included in the draft policy attempt to illustrate the circumstances in which a criminal prosecution may be considered, Pinto also calls for the inclusion of more helpful examples. She says:
“The examples given tend to sit at one end of the spectrum or the other - either falling clearly within the boundary of legitimate activity or clearly within the scope of the new offences. Most corporate activity will fall somewhere in between and this is where corporate sponsors, investors, lenders, trustees and their advisers need more clarity on how the new offences will be enforced to enable them to form a view about whether any proposed activity is lawful or not.”
Herbert Smith Freehills’ response also notes that the draft policy, which is due to be finalised before the new offences and the Regulator’s other new powers come into force, only covers the new criminal offences contained in the Pension Schemes Act 2021.
Pinto concludes: “Corporate sponsors, lenders, investors, advisers and trustees are as concerned, if not more so, about the new financial penalties that will be introduced under new section 88A Pensions Act 2004 as the expectation is that the Regulator will impose these more readily as they have a lower burden of proof.
“To prevent the new powers having an unintended drag effect on corporate activity and investment in the UK it essential that the Regulator issues corresponding guidance on how, and in what circumstances, it intends to exercise its new powers under section 88A and the new contribution notice triggers.”