Trustees and company directors will be criminally prosecuted if they borrow plan assets or if don't follow restrictions on investing plan assets in the company, the Pensions Regulator in the U.K. warned.
Following recent cases of some U.K. trustees and business owners breaching rules on employer-related investments, the regulator published guidance Tuesday on how plan assets could only be used by plan sponsors.
The guidance clarifies that no more than 5% of the current market value of plan assets may be invested in employer-related investments — such as shares or property, which is used for employer business operations — and plan assets can't be borrowed by the employer. In recent cases, TPR prosecuted the former owner of Norton Motorcycles, who in March last year received a prison sentence for illegally investing plan assets in the company.
Also, in November last year, two former trustees and directors of textile supplier Eastman Staples received suspended prison sentences for making illegal loans from plan assets to the company, which amounted to £236,000 ($284,050).
"Trustees should be in no doubt that where we see savers' funds being illegally invested, we will take firm action, which could result in a prison term," Erica Carroll, director of enforcement at the regulator said in a Tuesday news release.
"To continue to educate trustees about their ERI (employer related investments) duties, our new guidance clearly sets out the restrictions and the responsibilities that apply and so I urge all those involved in running pension schemes to read it, understand it and apply it," she added.
