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Chilling effect of The Pensions Regulator's new Criminal Powers policy

By Joshua Ng

The Pensions Regulator has recently published its new criminal offences policy. Notably, it has created the new criminal offences of “avoidance of employer debt” and “conduct risking accrued scheme benefits”. [1] As Financial Times reports, this appears to have exerted a chilling effect on M&A deals, with at least one deal having collapsed post-announcement. [2] The policy raises the question of how much more stringent the new regulations are, and hence the extent to which the risk calculus of companies is affected.

The Policy

Briefly, the new offences apply when someone (a person or a company) intentionally prevents or compromises the recovery of employer debt as part of a pension scheme [3] (“avoidance of employer debt”), and when someone intentionally acts in a way that adversely affects in a material way the likelihood of accrued scheme benefits being received [4] (“conduct risking accrued scheme benefits”). These acts must be committed without reasonable excuse. Penalties include an unlimited fine, up to seven years’ imprisonment, or both. [5]

Impact on Risk Calculus

The prospect of an unlimited fine seems daunting. In fact, previously, fines for similar offences were capped at £1m. [6] This represents a larger financial risk, in particular for transactions that are highly leveraged. [7] However, this is mitigated by the higher burden of proof necessary for proving a criminal offence. To prove criminality, the Court must be satisfied beyond reasonable doubt that there was criminal intent. Moreover, The Pensions Regulator has provided examples of what might constitute a reasonable excuse. [8] The clarity of guidance provided further mitigates the risk and uncertainty surrounding these new regulations. It is thus likely that the chilling effect exerted is temporary, with firms simply taking time to adjust due diligence processes in line with the new measures. If due diligence is performed correctly, it is likely that the risk calculus is not significantly affected for deals that are not highly leveraged.


[1] The Pensions Regulator, ‘Criminal offences policy’,, accessed 31 Dec 2021

[2] Josephine Cumbo, ‘New powers for UK pension watchdog hit dealmaking’, Financial Times, Dec 27 2021

[3] The Pensions Regulator, ‘Criminal offences policy’, C: The new offences

[4] Ibid

[6] The Pensions Regulator, ‘Criminal offences policy’, Appendix 1: More detail on the offences - comparison with CNs and the financial penalties in sections 58C and 58D

[7] Josephine Cumbo, ‘New powers for UK pension watchdog hit dealmaking’

[8] The Pensions Regulator, ‘Criminal offences policy’, Appendix 2: Our approach to some common behaviours and activities


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