Now that the election results have been confirmed, and the Conservative Party has secured a majority, we are expecting the Conservative Party to follow through on its manifesto promise and re-introduce the Pension Schemes Bill into Parliament when the Queen re-opens Parliament on 19 December.
As a result, it may not be long before a wide range of ordinary corporate activity could, in certain circumstances, be a criminal offence where a group operates a defined benefit pension scheme. This includes paying dividends, reorganising a corporate group, or granting security to a lender.
The bill would introduce two new criminal offences carrying a maximum penalty of seven years in prison where any person:
- engages in an act or conduct that they knew or ought to have known would have a “materially detrimental effect” on a defined benefit pension scheme; or
- commits an act that prevents the recovery of employer debt due to a defined benefit pension scheme or otherwise compromises or settles such a debt (including by means of arrangements permitted under pensions law).
The proposed new offences are startling broad in their scope, and go beyond the stated policy aim of deterring “reckless” and “unscrupulous” behaviour.
These offences have been framed to apply to “any person”, not just parties connected to the sponsoring employer of the pension scheme. This means the offences could apply to acts of third parties, including banks, investors, commercial counterparties, pension scheme trustees and professional advisers, even though there is no legal connection with the pension scheme. If enacted, these offences are likely to be a significant impediment to ordinary corporate activity carried out by groups with defined benefit pension schemes.
To read more about the bill, please see our blog post from earlier this month. If you would like us to meet with you to discuss how any of these issues could affect your business, please speak to your regular contact or call or email any of us listed in this email.