MPs and pension experts have welcomed government plans to introduce lengthy jail sentences for executives who recklessly mismanage pension funds, in an effort to avoid a repeat of recent scandals like BHS or Carillion.

Amber Rudd, the work and pensions secretary, said the current fines were not enough and that a new criminal offence would be introduced to punish “wilful or reckless behaviour” relating to a pension scheme, threatening unlimited fines and prison terms of up to seven years for the worst offenders.

She will tell parliament on Monday that the new measures “show that the Conservative government is on the side of workers saving for retirement” and that “we will protect their incomes from reckless behaviour”.

More than 10 million people are now enrolled in workplace pension schemes.

Rudd, a former JP Morgan banker and business executive, said: “For too long the reckless few playing fast and loose with people’s futures have got away scot-free. Acts of astonishing arrogance and abandon punished only with fines, barely denting bosses’ bank balances.

“Meanwhile, workers who have done the right thing and saved for retirement, confident their investments were safe, are left facing a leaner later life. That cannot be right, which is why, for the first time, we’re going to make wilful or reckless behaviour relating to pensions a criminal offence.”

Writing in the Sunday Telegraph, Rudd added that victims of such misconduct would “pick up a paper and read that the fat cat who fleeced you is boarding a private jet, living it up the lap of luxury. It’s the injustice that makes it so maddening.”

BHS, the retail chain formerly owned by Sir Philip Green, collapsed into administration in April 2016 with a £571m pension fund deficit. He had sold the chain a year earlier for £1.

The billionaire later agreed to pay £363m into the pension fund in a settlement with the pensions regulator, which found that Green’s “main purpose” in selling the department store was to avoid taking on liability for the scheme.

Frank Field, an independent MP who chairs the work and pensions committee, said Rudd “deserves huge credit for stepping in to sort this so early in her tenure, where others have so long failed to act”. He added that the new law should be applied retrospectively.

“Retrospection in the law is usually to be avoided, and for good reason. But the actions of greedy bosses like those at BHS and Carillion have torn apart thousands of people’s plans for the future. In such exceptional circumstances shouldn’t the long arm of the law be able to reach into the past, to gain justice for those who lost so much?”

Tom McPhail, head of retirement policy at the investment service Hargreaves Lansdown, also welcomed the new measure, but called for defined contribution schemes to be included.

“After all, if wilfully underfunding a defined benefit pension scheme becomes a criminal offence, why not defined contribution schemes too? We know typical contribution rates to these defined contribution schemes aren’t sufficient to fund a decent retirement for many employees.”

McPhail said the new criminal offence could have knock-on effects, such as putting greater pressure on the dividends of companies with large pension deficits, which could impact their share prices.

The measure could also accelerate the trend away from defined benefit schemes, prompting employers to get them funded to an adequate level, closed off and wound up.

Rudd warned company executives: “If you run your company pension into the ground, saddling it with massive, unsustainable debts, we’re coming for you.

“If you gamble your employees’ futures on risky investments that put a pension scheme at risk, we’re coming for you. And if you chronically mismanage a pension scheme and it goes under, we’re coming for you.”