Pension Related Criminal Offences: Impact on Lenders

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Pension Related Criminal Offences: Impact on Lenders

Published 29 julio 2022


The Pension Schemes Act 2021 (the “Act”), which became law on 11 February 2021, has changed the pensions landscape, including by extending the Pensions Regulator (“tPR”)’s powers in a way which could impact on certain finance transactions.

tPR’s powers

The Act gives tPR additional information gathering powers to inspect premises and require a person likely to hold information relevant to the exercise of its powers to attend an interview or answer questions.  In addition, there are two new grounds which make it easier for tPR to issue a contribution notice (a notice requiring a sponsoring employer and/or those associated/connected with the employer to pay money into a defined benefit (“DB”) pension scheme) and there will be changes made to the notifications that sponsoring employers of a DB pension scheme will be required to make.  Most notably though, the Act introduced new criminal offences relating to DB pension schemes which includes:

  • avoidance of a statutory s75 debt; and
  • conduct risking accrued scheme benefits.

These became criminal offences on 1 October 2021 and although the offences do not have retrospective effect, so tPR can only pursue parties in respect of acts/failures to act which took place on or after 1 October 2021, tPR has said in its guidance that it may take into account facts from before that date as part of its investigations (and indeed those being investigated may want to rely on the past in their defence).  These new criminal offences are in addition to tPR’s ability to issue civil penalties of up to £1 million in certain circumstances.

Another key point to note is that the new criminal offences apply to any person, not just trustees and sponsoring employers of DB pension schemes.  The legislation is widely drafted so this could include:

  • other members of the corporate group of a sponsoring employer of a DB pension scheme;
  • banks exercising contractual rights to call a default, accelerate or enforce security or lending to a sponsoring employer of a DB pension scheme;
  • parties entering into a joint venture with a sponsoring employer of a DB pension scheme; and
  • professional advisers except insolvency practitioners.


There is a defence to the two new criminal offences of “reasonable excuse”.  Although reasonable excuse is not defined in the Act, it is understood that it will be for tPR to prove that an excuse is not reasonable.  tPR has helpfully produced guidance on this defence and made it clear that it does not intend to prosecute ordinary commercial activity but rather to investigate intentional or reckless activity.  The factors tPR will take into account include:

  • whether any detriment caused was incidental;
  • if mitigation is offered, the adequacy of the mitigation and whether the DB pension scheme has been treated fairly compared to other stakeholders of the sponsoring employer; and
  • if no mitigation or inadequate mitigation has been offered, whether there was a viable alternative which could have avoided or reduced any detrimental impact.

tPR will look at these factors in light of the reasonable knowledge a person had at the time, based on having made reasonable enquiries.  tPR will also take into account certain other circumstances, such as communications with trustees and tPR.

However, it is important to remember that tPR’s guidance is guidance, not law.  Also, given that there is no clearance route available in respect of the new criminal offences and criminal offences are ultimately decided by Courts, lenders may want to proceed cautiously at this stage.

What can lenders do?

Although it is for tPR to establish that a party does not have a reasonable excuse, lenders will want to be able to demonstrate, as a matter of good governance, that they do have reasonable excuse.  In light of its intention not to prosecute ordinary commercial activity, tPR has recognised that lenders are entitled to pursue their commercial interests notwithstanding the (arguably incidental) impact of such conduct on any relevant DB pension scheme. 

When collating evidence that they have a reasonable excuse for their actions or inactions, lenders will want to ensure they have documentary evidence and records.  Lenders will want to be able to demonstrate that they have fully considered a situation and have justifiable commercial reasons for the actions or inactions chosen by them.  In practice, this could include:

  • reviewing the status of any DB pension scheme as part of their due diligence on a borrower;
  • considering mitigations which could reduce the impact of any consequential detriment on the DB pension scheme (this may also include liaising directly with tPR and/or the trustees or, as a minimum, requiring confirmation from the borrower that the necessary communications with tPR and/or trustees have taken place);
  • undertaking viable alternative analysis including stress testing and carrying out appropriate legal and financial analysis on available options (as time permits);
  • obtaining external advice as appropriate; and
  • ensuring they have good quality, contemporaneous records and minutes of meetings in which decisions were taken. 



Angela Hayes

Angela Hayes

London - Walbrook

+44 (0) 20 7894 6268

Khurram Shamsee

Khurram Shamsee

London - Walbrook

+44 (0)20 7894 6566

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