If you’re an employer, you need to take new pensions legislation extremely seriously. The new rules mean you could face up to seven years in prison for plundering funds. It’s the biggest change to pension regulations in as long as we can remember, and the impacts of it are detrimental to you as an individual, and to your business. It’s important you know what the new rules are, and how you’ll be impacted if you don’t follow them.
And it’s needed. Four years after BHS went into administration with an unaccountable £500,000 from their pension fund, we finally have a new set of rules. They’re there to protect what your employers are entitled to – what they’ve been working for – a fair pension. Because let’s face it, leaving your staff without a pension because you’ve spent it elsewhere is immoral and wrong, you’re risking their entire future. You’re potentially ruining their lives, and there must be consequences to that.
So, what are those consequences? Well, they’re about as harsh as they can get.
What are the consequences of plundering pensions?
How you’ll be punished for plundering pensions depends on the part you had to play in it, but there are a number of new criminal and civil offences you could be charged with, including knowingly or recklessly providing false information to trustees, and general non-compliance with general pension rules.
If you try to avoid employer debt by using the pension fund to carry out a corporate rescue, this is now an offence. That used to be considered normal behaviour, but you must not do it anymore. Pension pots are not savings accounts and should not be used as such. It is now a criminal offence to do so.
You’ll also be in trouble if you detrimentally affect the likelihood members of your pension will not receive their accrued benefit unless you have a reasonable excuse for doing it. This means that using your pension pot to reduce net assets in return for gains in the future is no longer permitted. It doesn’t matter if you didn’t mean to put the pension pot at risk; you did.
You can no longer point the finger at third parties. Trustees, employers and their advisors are jointly responsible, and therefore it is important that every one of you is paying careful attention to how your pension pot is being used. There’ll be no mercy for those who say they didn’t know. You should know.
You’ll also be accountable if you give The Pensions Regulator false or misleading information about a notifiable event. This one makes sense. Their there to protect the people, and if you’re lying to them, they can’t do that. It’s very important you take their role seriously.
Finally, if you fail to comply with a contribution notice without a reasonable excuse, when you were informed you must rectify losses caused because of avoidance behaviours, you will also be accountable. These are enforced in civil courts but mean that The Pensions regulator has a bigger voice, and more brawn.
We understand your knee jerk reaction might be to become overly cautious about your actions. The best thing you can do is seek legal advice, swallowing the additional cost to avoid heavy fines and potential criminal sanctions later.
The Pensions Regulator’s main job is to avoid unintended consequences for employees when employers mistreat the pension scheme. We’re expecting them to publish new guidance on how it will decide what is a criminal or civil proceeding, and what they will accept as an excuse, but it should be noted that this will not overthrow the law on this matter.
In the meantime, you can rest easy. It is unlikely they’ll start holding people to account until they have finalised their rules and written their guidance.
What must I do as an employer?
You must automatically enrol your employees in the pension scheme if they are eligible for automatic enrolment, though they can still choose to join, even if you are not legally obliged to enrol them. You are not allowed to refuse them.
You do not have to contribute to their pensions if they earn less than £520 a month, £120 a week, or £480 over four weeks.
When you enrol an employee, you must:
- Pay the minimum contributions to the pension scheme on time, usually by the 22nd of each month.
- Let employees leave the pension scheme if they ask and refund the money within a month.
- Let employees rejoin the scheme at least once a year, even if they opted out.
- Enrol employees back in at least every three years if they are still eligible for automatic enrolment.
- Encourage or force staff out of the scheme.
- Dismiss or discriminate against a staff member for staying in the scheme.
- Imply someone is more likely to get a job if they opt out of the company pension scheme.
- Close a pension scheme without automatically enrolling members into a new one.
The world of pensions is murky and complicated, even more so now with the new legislation. For help and guidance, contact JMR Solicitors on 0161 491 3933, or email email@example.com.