The work and pension secretary said displaying “reckless behaviour” over a pensions scheme will become a criminal offence.
She added that alongside a custodial sentence, authorities will have the ability to issue unlimited fines.
“To curb these freelancers playing fast and loose with your cash, I am going to make ‘wilful or reckless behaviour’ relating to a pension scheme a criminal offence, with jail terms of up to seven years for the worst offenders,” Ms Rudd said in The Sunday Telegraph.
“We’ll also give the courts powers to levy unlimited – yes unlimited – fines. So if you run your company pension into the ground, saddling it with massive, unsustainable debts, we’re coming for you.”
Ms Rudd issued the stark warning following the BHS pensions scandal.
A year after it was sold by Sir Philip Green for £1 in 2015, the retailer collapsed into administration, leaving a £571m pension deficit.
Sir Philip later agreed to pay £363m towards it to end action against him by the Pensions Regulator.
Liz Truss, Treasury chief secretary, backed Ms Rudd's proposals, saying it was wrong Sir Philip could “play merry hell” with pensions.
“It's about saying that's not acceptable, it's not acceptable to play merry hell with the contributions workers have made over a period of time and essentially run off without making good the pensions you promised to those people in the future, and so we'll take further sanctions,” she told Sky's Ridge On Sunday.
The government launched a consultation last summer as part of moves to beef up the powers of The Pensions Regulator (TPR), enabling it to step in more quickly and more often when companies make changes which could damage its pension scheme.
Additional reporting from agencies
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