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Pensions: Tougher jail terms for mismanaging funds Pensions: Tougher jail terms for mismanaging funds
(35 minutes later)
Company executives could face up to seven years in prison if they mismanage employee pension schemes. Company bosses could face up to seven years in prison if they mismanage employee pension schemes, says Work and Pensions Secretary Amber Rudd.
Work and Pensions Secretary Amber Rudd has proposed a new criminal offence for "wilfully or recklessly" mismanaging funds. She is proposing a new criminal offence of "wilfully or recklessly" mismanaging funds.
Plans outlined last year for a maximum sentence of two years in prison were toughened up after public consultation.Plans outlined last year for a maximum sentence of two years in prison were toughened up after public consultation.
Writing in the Sunday Telegraph, Ms Rudd said the law will target "the reckless few playing fast and loose".Writing in the Sunday Telegraph, Ms Rudd said the law will target "the reckless few playing fast and loose".
The failures of BHS, with a £500m deficit in its pension scheme, and the outsourcing group, Carillion, with an even bigger shortfall, prompted the government to conduct a review of pension law.
"If you run your company pension into the ground, saddling it with massive, unsustainable debts, we're coming for you," she said."If you run your company pension into the ground, saddling it with massive, unsustainable debts, we're coming for you," she said.
She said current rules mean that "acts of astonishing arrogance" by a few company directors are punished with fines "that barely dent bosses' bank balances". Ms Rudd said current rules mean that "acts of astonishing arrogance" by a few company directors are punished with fines "that barely dent bosses' bank balances".
Under the new law, courts would also be given the power to levy unlimited fines for mismanagement of pensions. Under the proposed new law, which still requires Parliamentary approval, courts would also be given the power to levy unlimited fines for mismanagement of pensions.
Dodge responsibility 'Years away'
The proposal follows calls for reform after one of the biggest pension scandals of the past decade, involving the retailer BHS. Nicola Parish, from The Pensions Regulator, said: "We welcome the proposed new powers which, as a package, would allow us to identify potential problems earlier and take more effective action."
Just one year after tycoon Sir Philip Green sold the retail chain for £1 in 2015, it collapsed along with its two pension schemes. But ex-pension minister Sir Steve Webb said civil action could be more effective.
That meant the loss of 11,000 jobs and put the pensions of 19,000 current and past employees under threat. Sir Steve, the former Liberal Democrat pensions minister in the coalition government, said that the criminal offence was "a good headline that risks achieving nothing or worse than nothing".
The Pensions Regulator concluded that Sir Philip Green sold the business to dodge responsibility for the company's pension scheme. He said it was difficult and potentially time wasting trying to show, under criminal law with its higher burden of proof, that bosses deliberately underfunded a pension scheme.
MPs called for Sir Philip to be stripped of his knighthood and a Parliamentary report called him the unacceptable face of British capitalism. Sir Steve, now director of policy at Royal London insurance firm, added: "This initiative was first floated before the last general election in 2017.
Sir Philip later agreed to pay £363m into the pension schemes. "Two years on, we have not even had the primary legislation. We are years away from seeing this in force."