Company directors will become criminally liable for wilful or reckless behaviour in relation to employers' pensions, under proposals announced by the UK Government today.
Those who allow deficits to escalate to unsustainable levels, or who endanger their workers’ savings through chronic mismanagement, face an unlimited fine or up to seven years in prison.
The move follows a Government review in the wake of the collapse of store chain BHS and construction group Carillion, each with a huge deficit in its pension scheme. A consultation last year proposed an offence with a sentence of up to two years, but the maximum has now been substantially increased.
Secretary of State for Work and Pensions Amber Rudd, said: "For too long the reckless few playing fast and loose with people’s futures have got away scot-free. 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."
The Pension Regulator's office welcomed the proposals, "which, as a package, would allow us to identify potential problems earlier and take more effective action". However former Pensions Minister Sir Steve Webb called it "a good headline that risks achieving nothing or worse than nothing". He argued that civil action was more effective given the difficulty of showing to the criminal standard of proof that directors had deliberately underfunded a pension scheme.
Ms Rudd also hailed figures that show that more than 10m people have been brought into workplace pensions saving by automatic enrolment since 2012.
Minimum contribution rates under automatic enrolment are due to rise from 5% to 8% in April, but the proportion of people who stopped saving through automatic enrolment was just 0.7% in the three months following the April 2018 increase in contribution rates, compared to 0.6% for the four year period beforehand.