MPs call for ‘punitive fines’ to prevent repeat of BHS pensions scandal

MPs have called on The Pensions Regulator (TPR) to impose punitive fines to deter companies from avoiding pension responsibilities.

The Work and Pensions Committee expects the fine would never need to be levied in practice, as it would act as a strong deterrent to prevent disasters such as the BHS pensions fund.

In the case of BHS, TPR is reportedly asking for a £350m contribution to the pension deficit. Under the proposed new powers, that would equate to a charge of £1bn.

The proposals also include allowing TPR to become a proactive regulator that could intervene sooner when difficulties become apparent – before problems begin to compound.

The committee has called on the Government to consult on new rules for situations where TPR clearance of major corporate transactions is mandatory. This would allow TPR to decide if a particular proposed corporate change could damage a pension scheme.

Rt Hon Frank Field MP, chair of the committee, said: “It is difficult to imagine the Pensions Regulator would still be having to negotiate with Sir Philip Green if he had been facing a bill of £1bn, rather than £350m.

“The measures we set out in this report are intended to reduce the chance of another scheme going down the BHS route. 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.

“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.”

Estelle Clark, executive director policy at the CQI, said: “Giving TPR the rights to levy punitive fines is bound to prevent future scandals, as even Sir Philip Green would have baulked at contemplating finding £1bn! But, surely the remit and powers of a regulator should be greater than to name and shame? On the surface, it seems obvious for TPR to be a proactive regulator, but this assumes TPR has a clairvoyant-like ability to gain confidential company insight.

“This is why the Work and Pensions Committee is consulting whether TPR should have an obligation to approve major corporate transactions as not having a detrimental effect on pension schemes. It’s a huge step to take and my concern is whether it’s sensible to assume TPR can understand the circumstances of major corporate decisions.

“I am even more concerned about TPR’s ability to have sufficient staff of the right calibre to avoid this being a box-ticking activity. The danger in this suggestion is that the remedy might be worse than the ailment.”