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UK Pensions Regulator calls for power to veto corporate actions

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The UK’s Pensions Regulator (TPR) has detailed a number of ways it believes its powers should be expanded to protect pension scheme members, including being given the ability to refuse clearance for certain proposed corporate actions.

In its written submission to the parliament’s Work and Pensions Committee, which is conducting a broadened inquiry into the Pension Protection Fund (PPF) and TPR, the regulator highlighted several potential improvements to pensions regulation as it now stands. 

A spokesperson for TPR said: “Our submission to the Work and Pensions Select Committee sets out a number of ways where we feel the regulatory framework could be strengthened in areas such as clearance on corporate actions and information gathering.”

“We look forward to giving evidence to the inquiry to elaborate on these proposals in more detail in the coming weeks.”

The submission highlights a number of potential improvements from TPR’s point of view, including developing the regulator’s way of working so that it focuses more intensively on those pension schemes posing the greatest risk.

It also proposes introducing mandatory clearance “in a targeted set of circumstances where corporate activity may pose a material risk to a scheme”, it said.

As things stand, there is no obligation on a company to apply for clearance from TPR for any transaction, or other relevant situation, the regulator said.

The regulator went on to propose enhancing its information-gathering and investigatory powers.

On the subject of pension scheme funding, TPR proposed that greater flexibility be introduced over the valuation periods used, and said more regular valuations should be required for higher-risk schemes.

The regulator’s scheme funding powers should also be clarified so that it can specify an appropriate level of funding and contributions, it said.

TPR qualified its proposals, saying: “It will be a matter for government and parliament to decide what is a proportionate response to the challenges within the DB landscape.”

It also emphasised that it did not see evidence of a systemic problem with affordability in UK DB pensions.

“Most employers will be able to support their schemes making use of the flexibility within the funding framework established by the 2004 Act,” it said.

Earlier this year, the Work and Pensions Committee heard evidence about the collapse of the BHS retail chain, which left the company’s pension scheme with a £571m (€634m) shortfall and forced it to be rescued by the PPF.

In its recent written submission to the inquiry, the PPF backed the regulator’s call for greater powers.

The PPF said it believed deficits on a PPF basis were a real risk to members of those schemes, as well as its levy payers, since if the employer became insolvent, poorly funded schemes would pass to the lifeboat fund.

“In our view, more could be done to ensure schemes are sufficiently funded, and employers continue to stand behind their promises,” it said.

To help this happen, it said, “targeted improvements to the powers available to the Pensions Regulator” may be needed. 

It added: “We recognise, however, there are a number of schemes and employers where promises may now be unaffordable and that a specific regime, with suitable safeguards, would be appropriate.”

The deadline for written submissions to the committee closed last month, and oral evidence sessions are set to begin soon, continuing to around the end of November.

The committee is expected to publish its recommendations in January 2017.

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