UK pensions regulator hits back at suggestion it lacks 'teeth'

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The UK’s Pensions Regulator (TPR) has defended itself against accusations it does not possess the requisite “teeth” to regulate the defined benefit (DB) sector, amid an examination of the insolvency of retailer BHS.

During a joint hearing by the work and pensions select committee with its counterpart for business, innovation and skills, Lesley Titcomb, the regulator’s chief executive, rejected repeated suggestions TPR lacked the requisite powers to deal with situations akin to the collapse of BHS.

The insolvency of BHS saw two DB funds sponsored by the employer left with a combined buyout deficit of £571m (€734m).

It has led to questions of whether its former owner, the Arcadia Group, should have increased its contributions to address the deficits sooner than the 23-year timeline of its deficit-reduction schedule envisaged.

Titcomb argued that, for the “vast majority” of pension funds, the current regulatory framework was sufficient, rejecting claims TPR could only take action when it was too late.

“We see that if there is a strong, well-behaved, responsible employer standing behind the scheme, that is the best thing for it, and it is right to give that sufficient time to work through,” she told MPs during the meeting on 9 May.

When it was put to her that TPR was “not much of a regulator”, Titcomb pushed back.

“I don’t agree with that statement,” she said. “We have to, as a regulator, operate within the framework provided to us.”

She also questioned the need for TPR’s powers to be enhanced.

“The work and pensions select committee is well aware I am prepared to ask for more tools in my toolkit if I need them,” she said. 

Twenty-three-year recovery plan

Titcomb agreed the length of the BHS recovery plan was “atypical”, noting trustees usually submit funding proposals of 7-12 years.

However, she emphasised that the 23-year plan, submitted in 2014 as part of the 2012 triennial valuation, had not been approved by the regulator by the time Arcadia Group sold BHS to Retail Acquisitions in 2015, which triggered the launch of a still-ongoing anti-avoidance case.

Retail Acquisitions was the company’s owner when, last month, it entered administration.

Speaking during the same committee hearing, the Pension Protection Fund’s chief executive Alan Rubenstein said there were lessons to be learned from the collapse of BHS.

He suggested there should be “some natural limit” to the flexibility granted to deficit-reduction payments under the current system, arguing in favour of shorter repayment periods.

He also pointed out, however, that TPR had a number of issues it needed to address and that it did not wish to “push companies over the edge”.

Readers' comments (1)

  • Yes but the elephant in the room is the method used to determine these massive deficits. Using a buy-out Gilts based measure at a time when the bank of England has bought up £350bn of Gilts (causing demand to outstrip supply) in conjunction with ultra low interest rates; and a regulatory regime that virtually forces insurers, banks and pension funds to buy up Gilts (or other equally secure bonds) inevitably is going to create large deficits, except where the pension plan owns 100% Gilts with appropriate duration (I think the bank of England did this in 2007/8 - insider dealing?). Is this a good thing? I would say lending billions and billions to governments at super low rates for the next 50 years or so is not very efficient. Would the money be better invested in growth assets for the benefit of the whole economy and population?

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