UK - Pension Corporation has agreed to abide by a proposal from The Pensions Regulator (TPR) stating it will not appoint a member of the firm as a trustee of the Telent pension scheme, without first gaining approval from the Regulator.

TPR confirmed in a Section 89 report - following the determination panel's decision to uphold TPR's appointment of three independent trustees to the Telent scheme - negotiations between parties have resulted in the development of an "effective governance structure".

In the report, TPR stated despite having "denied there was a serious problem with conflicts of interest" in the application to the determinations panel, Pension Corporation has been "subsequently engaged" in developing a new structure to be put in place once the determination order expires on April 18 2008.

To allow this to take place, TPR revealed Pension Corporation has agreed a "unilateral undertaking" that it will not permit anyone from the company, or from "a wide range of associated entities", to be appointed as a trustee to "any scheme in which Pension Corporation has a specified financial interest or liability" without gaining approval from TPR.

In addition, Pension Corporation confirmed it would not seek approval within the first 18 months of the undertaking, as TPR stated in its report it "had been made clear" to the firm "unless there are substantial changes" to remove the issue of conflicts of interest around the Telent scheme then "the regulator's position is very unlikely to change".

TPR said the undertaking has been incorporated into the trust deed and rules of the Telent scheme and the articles of association of the trustees, and noted the firm is "required to use its best endeavours" to introduce the same agreement into other schemes where it controls the principal employer - such as Thresher Group and Thorn Ltd.

The new governance structure of the Telent scheme will mean the trustee board will in future consist of nine directors - three nominated by the employer, three nominated by the members and three independent directors who will appoint their successors from TPR's list of independent trustees.

The three independent directors will also be classed as "conflict directors" in a new conflicts of interest protocol - to help identify and manage issues - while one of the independent directors will also have to be appointed chair of trustees.

A spokesman for Pension Corporation said: "We are pleased to have reached agreement with TPR and look forward to moving on. We are looking forward to working with the trustees to manage the plan. We believe that the trustee board structure is balanced."

TPR claimed, in its report, the package of measures "addresses the concerns that were before the determinations panel" and provide "express recognition of the significant risks posed by conflicts of interest for the scheme".

However, it warned although the new structure of governance should provide "effective management" of the risks, TPR has "reserved the right to exercise any of its statutory powers in relation to the scheme in the future". 

The report follows TPR's decision in October to appoint three independent trustees to the Telent pension scheme, as there were fears Pension Corporation could appoint new trustees to adopt an aggressive investment strategy with the aim of increasing assets to 105% of liabilities, so the firm could gain access a £514m (€643m) escrow account. (See earlier story: UK regulator appoints trustees to Telent scheme)

Meanwhile, Cable & Wireless is believed to be looking at the possible options for buying out its £2bn pension scheme, after it is reputed to have sent out details of the scheme to key buy-out companies including Lucida and Paternoster.

IPE learnt in October the company was considering a buyout, after it stated it was looking to split its less profitable British arm from the international business within the next two years. (See earlier story: Cable & Wireless considers buyout)

The firm's UK pension scheme reported a surplus of £211m at the end of September 2007, compared with £43m in March 2007, and in November the company confirmed the scheme's asset portfolio had been "recently rebalanced" towards bonds and cash to "lock in value following strong equity performance", while a swaps programme on £900m of assets had been implemented to better match assets to liabilities.

Cable & Wireless was unavailable for comment at the time of publication, although the company has previously declined to confirm whether it is actively seeking a buyout solution.

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