Trustees face jail threat under 'extraordinary' pension bill provisions
PTL managing director Richard Butcher has warned trustees could face jail under proposed pension schemes bill additions to the Pensions Act 2004.
Butcher - who is also chairman of the Pensions and Lifetime Savings Association - said s107 of the pension schemes bill will mean that if any person acts with an effect that reduces the likelihood of defined (DB) benefits being paid they can be sent to prison for seven years and or be fined up to £1m.
He said they must have acted knowingly for this to happen and they could have a reasonable excuse which would get them off the hook.
But he warns these "extraordinary" new powers seemed like a significant extension of original proposals which "talked about going after reckless employers, not going after trustees".
Butcher explained: "The first concern is that this covers any person - a trustee, the scheme actuary, the trustees' lawyer, maybe many others too."
"The second concern is over the phrase ‘an act that reduces the likelihood'. This could, of course, be a phrase used to describe an agreement to permit a deficit to be paid over a period of time. It could equally describe the decision to invest in an asset with any risk at all."
He added the third concern was around the reasonable excuse test.
Butcher said: "I'm OK with an escape hatch but this could open up years of debate. Let's say I agree to allow a deficit to be paid over five years - how would I prove (or how could it be disproven) that was reasonable? When it comes to funding nothing is ever black and white. We always have to work with shades of grey."
He said the final point was less likely but could emphasise the broader concerns he has with these provisions.
Butcher explained: "Say a government minister or a regulator suggested (as has happened in the past) that trustees shouldn't act with reckless prudence - they would know the effect of their words, they may have a reasonable excuse for them but, if by merit of their words, a trustee took a more liberal line in a valuation and it went pear shaped, could the minister or regulator be prosecuted under this provision?"
Butcher agreed that the bill is still only a bill and could change - but he urged trustees to make their views known to ministers.
He said: "The key concern is that this provision, as drafted, is too vague and broad. It exposes both myself and many others to really serious sanctions."
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