Pendle MP Andrew Stephenson said the new measures would give workers the assurances they needed that their future retirement savings were safe when a company fails.
The White Paper “Protecting Defined Benefit Pension Schemes” laid before Parliament on Monday (19 March) will make it a criminal offence to neglect pension responsibilities and could see businesses hit with fines or even prison sentences if they fail to meet their duty. The move comes in the wake of the BHS and Carillion collapses.
There are more than 10.5 million Defined Benefit Pension scheme members in the UK and most employers are doing the right thing and people will get their pension in full. Employers behaving correctly will not see major changes but everyone will be given clear instructions of what is expected from them.
Mr Stephenson said: “Businesses need support to ensure they can grow and prosper but they also have a responsibility to their employees to meet their pension promise.
“I am delighted Government listened and is introducing penalties for companies that neglect their duties to their pension schemes. Hopefully this will act as a deterrent to businesses and reassure workers that Government are taking action to protect their pensions.”
A Defined Benefit Pension is where the employer promises a specified pension payment, or lump sum, or combination on retirement. It is predetermined by a formula based on earnings, length of service and age, rather than being based on individual investment returns.
Under the changes the Pensions Regulator will be given more powers to get the information they need quickly. Tougher penalties will be introduced, including hefty fines and criminal convictions for those who “wilfully or recklessly” put the financial future of employees at risk.
Secretary of State for Work and Pensions Esther McVey said: “Up and down the country the vast majority of employers are doing the right thing and acting in the best interests of their staff.
“But we have seen what can go wrong; therefore we will clamp down on and - where appropriate - punish directors who wilfully or recklessly put pension schemes at risk. It is right that those responsible face tougher sanctions and we need to make sure that the Pensions Regulator has the powers in place to act swiftly when action is needed.”
The White Paper comes after a wide-ranging consultation with workers, employers and the pensions industry. Other initiatives will support consolidation of DB schemes, making them more efficient and improving Governance.