The new pensions offences coming into force

20 September 2021

On 1 October 2021, the new offences of “avoiding an employer debt” and “conduct risking accrued scheme benefits” under the Pension Schemes Act 2021 will come into force. These offences may affect anyone dealing with an employer with a defined benefit scheme, including counterparties, lenders and advisers, unless they have a “reasonable excuse”.

Described as “revolutionary” by Guy Opperman, the Pensions Minister, when the bill was introduced, the legislation still requires the Pensions Regulator to draw the line between what is reasonable and what is criminal in a policy that is still awaited weeks before the offences come into force.

Who should read this?

Anyone dealing with a corporate group that sponsors a defined benefit pension scheme.

This includes not just the sponsors of the scheme and shareholders but also lenders, material commercial counterparties and their directors and advisers.

Criminal prosecutions under the Pension Schemes Act 2021 are expected to be rare but all should be aware of the elements of the offences and the scope of the Pensions Regulator’s information powers.

The main offences

“Avoidance of an employer debt” is committed by engaging intentionally in a course of conduct (or an act or omission) that:

  • prevents the recovery of the whole or any part of a s.75 debt due from the employer;
  • prevents the debt becoming due;
  • compromises or otherwise settles the debt; or
  • reduces the amount of the debt becoming due without a reasonable excuse.

“Conduct risking accrued scheme benefits” is committed if a person:

  • engages in a course of conduct (or an act or omission) that detrimentally affects in a material way the likelihood of accrued scheme benefits being received (whether the benefits are to be received as benefits under the scheme or otherwise);
  • knew or ought to have known that the course of conduct would have that effect; and
  • did so without a reasonable excuse.

The offences can be committed by any person, not just those who have responsibility for the pension scheme or are associated or connected with the scheme’s sponsor. Sanctions are up to 7 years imprisonment and an unlimited fine.

Clearance is not available for the new offences. However, it is expected that if the transaction has received clearance from the Pensions Regulator, it is unlikely that there will be a successful prosecution.

Secondary offences

The Pensions Regulator has highlighted that advisers and others, who are not party to the relevant transactions, may commit the offences by aiding, abetting, counselling or procuring the relevant act or course of conduct if they do so without a reasonable excuse.

As such, all advisers can be liable. This also means they will be concerned to avoid liability and cannot give entirely dispassionate advice. Equally, independent advisers who did not advise on the original suspect transaction may be required to give advice on criminal liability exposure.


The ingredients of the offences are broad and may in principle catch any course of dealing that reduces the resources available to fund the scheme or the scheme’s recoveries in a default scenario. As such, they may cover a wide range of ordinary business activities. This is subject to whether the person has a “reasonable excuse”.

Guy Opperman has stated that the intention is not to frustrate legitimate business activities.  Much therefore turns on what may constitute a “reasonable excuse”.

The Pensions Regulator issued a draft policy on its approach to investigating and prosecuting the new offences and, at the time of writing, a definitive policy is expected imminently. The draft policy attempted to illustrate by examples what would constitute a reasonable excuse. The final version is awaited and we hope it will clarify the distinction between legitimate activities and criminal activities.

Arguably, the need for the policy is an admission that the offences on their own terms are too vague. The legislators appear to be delegating the task of framing the offences to the Pensions Regulator as prosecutor. This is revolution backwards.

“Vague laws which purport to create criminal liability are undesirable, and in extreme cases, where it occurs, their very vagueness may make it impossible to identify the conduct which is prohibited by a criminal sanction. If the court is forced to guess at the ingredients of a purported crime any conviction for it would be unsafe.” LJ Judge in R v Misra and Srivastava [2004] 

"A vague law impermissibly delegates basic policy matters to policemen, judges and juries for resolution..." United States Supreme Court, approved by Lord Phillips MR in The Queen (ZL and VL) v Secretary of State for the Home Department [2003].

Information powers and criminal sanctions

From 1 October 2021, the Pensions Regulator’s information powers are extended to cover information relating to the administration of the employer’s business, its assets or any decisions on change of ownership.

The Pensions Regulator may issue formal information requests for documents, summon individuals for interview to answer questions or provide explanations or carry out “dawn raids” if it believes such persons or places hold any such information.

Failure to comply with the notice (which would include attending but not answering the Pensions Regulator’s questions) without a reasonable excuse is a criminal offence and can also lead to financial penalties issued by the Pensions Regulator.

From 1 October 2021, the Pensions Regulator will also be able to require a person to provide information which may incriminate that person or their spouse or civil partner.

There is an exemption for legally privileged material but this may not apply if it relates to a matter which falls within the new offences.


The vagueness of the law and the number of parties, including advisers and principles, who will be exposed to the risk of criminal sanction for misjudging a “reasonable excuse” should drive caution where a defined benefit pension scheme may be impacted by any transaction or arrangement. The information offences and scope for adviser liability will severely limit the availability of confidential, dispassionate advice.

Wherever possible, consensus is likely to require the pension scheme to be shielded from any downside in a transaction or course of dealing. Where a risk of detriment to the scheme is unavoidable, we expect clearance applications to be common.