Key Dates

Final criminal offence policy issued on 29 September 2021.

Consultation paper and draft policy issued on 11 March 2021.

New offences under the Pension Schemes Act 2021 have effect from 1 October 2021.

Summary

The Pensions Regulator (tPR) has issued a policy setting out its approach to prosecuting the new criminal offences of “avoidance of employer debt” (under new section 58A Pensions Act 2004) and “conduct risking accrued scheme benefits” (under new section 58B Pensions Act 2004).  tPR consulted on a draft of the policy in May 2021.

tPR confirms that it does not intend to prosecute behaviour considered “ordinary commercial activity”, but instead will investigate and prosecute “most serious examples of intentional or reckless conduct that were already within the scope of our CN power [power to issue a contribution notice], or would be in scope if the person was connected with the scheme employer”.

It will be for  the prosecution to prove that the target did not have a “reasonable excuse” for the act or omission (please see below).

In updated clearance guidance issued in September 2021, tPR makes clear that trustees who believe that a criminal offence may have been, or may be, committed are expected to contact tPR.

Elements needed for prosecution

tPR’s policy explains that prosecution will only be considered if the following five tests are met:

• Act element: there was an act (or failure to act) satisfying the criteria under sections 58A or 58B;
• Mental element: for a section 58A offence, the person intended the act to have the relevant effect; for a section 58B offence, the person knew, or ought to have known, that the act would have a materially detrimental effect;
• The person had no reasonable excuse for the act (or failure to act);
• There is sufficient evidence likely to satisfy the criminal burden of proof (the “beyond all reasonable doubt” test); and
• Prosecution must serve the public interest.

Reasonable excuse

• The new offences will only be committed if the person did not have a “reasonable excuse” for the act or failure to act.  If the prosecutor cannot prove beyond reasonable doubt that the accused person did not have a reasonable excuse, then no offence is committed.
• However, tPR makes clear that it expects those it investigates to explain their actions and to put forward sufficient evidence of any matters which might amount to a reasonable excuse.  tPR expects that the basis of the reasonable excuse will be clear from contemporaneous records, such as minutes, correspondence and written advice. 
• Three factors will be significant in assessing whether a person had a reasonable excuse:
  • Whether the detrimental effect on the pension scheme was central to the act (or failure to act) or whether it was merely an incidental consequence;
  • The adequacy of any mitigation put in place to counter any detrimental effect of the act (or failure to act); and
  • Whether there was a viable (less detrimental) alternative to the act (or failure).  An example of where there may be no less detrimental option is raising debt with higher priority to the pension scheme, where the debt is critical to the employer’s survival, and continuation of the employer as a going concern is a better outcome for the pension scheme than the employer’s insolvency.

Position of professionals

tPR considers that professionals who act in accordance with their professional duties, conduct obligations and ethical standards are more likely to have a “reasonable excuse” and so not be liable for a criminal offence.

Date Accessed: 28/05/2022