UK acts on pension “liability dumping” fears
UK – The government has acted over fears that companies would be able to dump their pension liabilities onto the new Pension Protection Fund.
"With the moral hazard clauses in the Pensions Bill we have sent a strong message to unscrupulous employers: they can't use company structures and business transactions as a cover for avoiding their pensions obligations and dumping their liabilities,” said pensions minister Malcolm Wicks.
"As promised, we've consulted with the industry over the summer and have listened to their concerns. The amendments we have put forward to the Bill today will provide the reassurance responsible businesses have asked for on the aims, objectives and practical application of the moral hazard clauses.”
The main amendments include: a time limit of six years as well as ensuring the regulator will have to take into account “any adverse affect on employment”.
The regulator will also make decisions in relation to clearance “as soon as reasonably practicable” where companies are undergoing restructuring and want
Clarification. But it would not be bound by any clearance statement if there is a material change in circumstances.
The government added that it is “not the intention that individual directors or shareholders would be liable for any pension deficit”.
“Therefore the majority of individuals will be excluded from the scope of the financial support directions.”
PricewaterhouseCoopers, which consulted with the government on the matter, said it welcomed the move.
“These changes offer good news for British business - they will help legitimate business transactions proceed whilst keeping the size of levy under control,” said PWC chief actuary Trevor Llanwarne.