A report from the Work and Pensions Committee has called on the government to introduce punitive fines for employers who fail to support their firms’ pensions schemes.
It recommends the government give The Pensions Regulator (TPR) enforcement powers that will allow it to impose the “nuclear deterrent of a potential punitive anti-avoidance fine” of up to treble the amount payable.
The inquiry follows the collapse of the BHS pensions scheme. TPR has already asked former owner Philip Green for a £350 million contribution to the pensions deficit. Under the new plans that could become a charge of up to £1 billion, the Committee says.
The Committee also recommends TPR be reformed to become “nimbler and more proactive” to allow it to intervene sooner where it has concerns. It says any pensions recovery plans timetables should be reduced to nine months, and that recovery plans should not last more than 10 years.
Committee chair MP Frank Field said the measures are intended “to reduce the chance of another scheme going down the BHS route”.
"It is difficult to imagine the Pensions Regulator would still be having to negotiate with Philip Green if he had been facing a bill of £1 billion, rather than £350 million. He would have sorted the pension scheme long ago," he added.
“We hope and expect that we will never again see a company like BHS be able to come up with a 23-year recovery plan for its pension fund, and certainly not that it would take the Regulator two years to really begin to do anything about it.
“To prevent another BHS we need to have the means to nip inevitable disasters like this one in the bud. We hope the government will consult on the package of measures we propose, which would go a long way, without resorting to any new reams of red tape, towards doing just that.”
BHS’s pension scheme was left with a deficit of £571 million when the chain went into administration in April this year. More than 11,000 jobs were lost.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, said the huge fines may never actually need to be enforced if introduced.
“The proposed nuclear deterrence of punitive fines where employers deliberately neglect their promises or seek to avoid their responsibilities could be used as part of a wider regulatory review to ensure that, as far as possible, the Regulator never needs to actually pull the trigger,” he said.
