Bosses should face “nuclear deterrent” punitive fines for avoiding pension responsibilities to avoid a BHS-style “disaster” happening again, an influential group of MPs has said.
The House of Commons work and pensions committee said stronger regulatory powers would give Sir Philip Green more incentive to make good on his promise to “sort” the £571 million BHS pension fund black hole. Sir Philip is thought to have offered £250m to help plug the deficit, £100m less than the Pensions Regulator demanded.
But the MPs said the regulator should have the power to impose fines that could treble the amount payable towards covering a pension scheme deficit. That would mean it could threaten Sir Philip with a fine of up to £1 billion unless he paid his contribution.
The power would act as such a strong deterrent to avoiding responsibilities that it would never have to be used in practice, the committee’s report on defined benefit pension schemes said.
Labour MP and committee chairman Frank Field 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. He would have sorted the pension scheme long ago.”
The cross-party committee made a number of other recommendations for the regulation of pension schemes, insisting that responsible employers have “nothing to fear” from the proposals.
The MPs said regulatory intervention is often “clunky” and concentrated on stages when a company pension scheme is in severe distress or has already collapsed.
The committee said the regulator should be reformed into something “nimbler” and “more proactive” to intervene sooner when company pension schemes appear to be in difficulty – before problems mount up.
The committee said the regulator should “never again” take two years to intervene in a pension negotiation that concludes with a 23-year deficit reduction plan, as in the case of BHS.
Instead, recovery plans of more than ten years should be “exceptional”, and the government should consult on new rules for situations where pensions regulator clearance of major corporate takeovers or transactions is mandatory rather than voluntary.