Putting Things In Perspective


The farmer walked around his farm every day. For quite a while now, he had noticed the stable was empty and the door open. One day, as he walked by again, he saw one of the farmhands. “Good morning” he said.

“Good morning” replied the farmhand.

“I’ve noticed”, said the farmer, “the stable. It’s empty.”

“Yes” replied the farmhand.

“How long has it been empty?” enquired the farmer.

“A long time. At least 2 years.” came the reply.

“I see” said the farmer. “Still, best to shut the door.”

I can’t help but feel this is a good metaphor for the recent announcement by Amber Rudd, our new Work & Pensions Secretary, that company directors who “wilfully and recklessly” mismanage their company pension scheme now risk being prosecuted as criminals with potential jail terms of up to 7 years.

This has been driven by events at BHS. It is estimated that Philip Green and his family received well in excess of £800M from BHS in dividends, rent and management charges. He negotiated a £363 settlement with The Pensions Regulator which, by my calculations, leaves him and his family over £400M up on the deal. This looks bad, but do we want another knee jerk reaction to one isolated incident of alleged mismanagement when, due to the already strict regulations, final salary schemes are becoming a thing of the past?

I would urge caution for fear of alarming the wider public unnecessarily. I would make two points.

First, the vast majority of company directors are not (potential or otherwise) wilful and reckless mismanagers’ of anybody’s pension scheme.

Secondly, the vast majority of the pension schemes in place since 2012, cannot be mismanaged by company directors. They are run by third parties who have their own Boards Of Trustees and investment committees that take no instruction from, nor are influenced by the directors of the employers who choose to use them.

That said, the potential additional ramifications for the extremely rare cases of mismanagement are to be welcomed, although I question why it is being moved to criminal law from civil law. Ultimately, prosecutions will be more difficult as civil law is based on the “balance of probabilities” whereas criminal law is “beyond reasonable doubt”.

Ultimately, any change to the law that gives reassurance to pension scheme members about the safety of their money is to be welcomed but this does smack more than a little of headline grabbing.

Personally, I’d prefer to have seen the energy and resources put into this matter used on getting the Pensions Dashboard up and running. I can but wish…



This information is provided strictly for general consideration only. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned about the content hereof and any such action or inaction. Professional advice is necessary for every case.

Peter Murphy DipPFS

Benefits Adviser