UK - The British Private Equity and Venture Capital Association (BVCA) has confirmed it is considering recommending members not to buy companies with defined benefit (DB) pension plans, following the government's decision to increase the enforcement powers of The Pensions Regulator (TPR).

Earlier this week, the Department for Work and Pensions (DWP) issued a consultation on proposals that would extend the circumstances in which TPR could issue contribution notices and financial support directions. [See earlier story: DWP extends TPR buyout powers].

However, Simon Walker, chief executive of the BVCA, raised concerns about the "unintended impact" the proposals would have on a wide range of corporate activity, including private equity.

He warned the government that the changes would deter investment, and claimed that the organisation has "already seen evidence of deals not happening as a result of this announcement".

The government said the decision to extend TPR's powers was a result of increasing concerns that some business models emerging in the pensions industry treated schemes as a "commodity to be bought or sold".

Mike O'Brien, the minister for pensions reform, also claimed that the vast majority of employers would be unaffected, as the new powers would only be targeted at "risky situations".

But, Walker argued: "Given the current economic difficulties, there will undoubtedly be many industrial companies, some with DB pension schemes, which will be badly in need of investment.  Their prospects would be damaged by these proposals."

In addition, he claimed that the current timeline proposed by the DWP for implementing the changes will "potentially leave the industry in the dark for six months".

As a result the BVCA has confirmed it is "considering" taking the step of recommending members not to buy companies with DB schemes, although a spokeswoman added that "nothing concrete" had yet been decided. 

Walker added: "It is not enough to say the regulator will act responsibly. If he has the legal capacity to abort corporate decisions that will be sufficient to stop deals happening".
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