UK - Legal experts have warned The Pensions Regulator could be forced to enact powers beyond its current legislated remit from this summer because of regulatory pressure on pension fund trustees.

UK law firm Macfarlanes said recent moves related to the ‘clearance' of corporate transactions, such as mergers and acquisitions, indicate TPR is considering tightening its guidance on how pension funding should be handled.

However, this is thought to be creeping beyond the responsibilities given to TPR, suggests Jan Marshall, pensions partner at Macfarlane, and there is some concern TPR is being pressured into setting out greater rules because trustees are increasingly turning to TPR for guidance on whether corporate transactions should be approved.

"When you have a high profile deal, particularly if it involves private equity for example, the trustees feel they need to draw in the Regulator for guidance," said Marshall.
"The Regulator has been very clear he is not a player he is a referee. Legislation has made clear the people who have to make these [funding] decisions are the employer and the trustees.

"But if the regulator is saying they should be looking for a particular package [from the deal], how does that square with saying it is the responsibility of the employer and trustees to make the funding decisions

"What we are getting is a change from that emphasis of the responsibility, and we are seeing an air of uncertainty creeping when people thought they understood the regime. We want to see the responsibility for pension funds in the hands of the trustee and employers," continued Marshall.

TPR is expected to issue tightened guidlines on pensions in corporate transactions later this summer suggesting a greater number of corporate takeover deals will have to be cleared by The Pensions Regulator - a process effectively confirming it will not place statutory action on the sponsoring employer to rectify the pension fund's financing position.

Macfarlane is keen to stress it is not against the publication of this guidance but questioned whether "the goalposts are being moved" by the Regulator in relation to the treatment of pensions in corporate activity, particularly since the first Financial Support Direction (FSD) was issued on Sea Containers last month.

Marshall suggested it is perhaps because trustees are under so much existing regulatory pressure the TPR is finding it is necessary to issue clarifications which help them understand their roles but at the same time appear to be widening into objective standards.

"We have to avoid an affect where a range of different [corporate] transactions are judged as needing to be dealt with in the same way," said Macfarlane.

"People seem to have expectations of what trustees should do which go beyond what trustees can actually do. I think trustees want to do the right thing but they feel now they have to go for the safest option and approach the Regulator. Sometimes that will be the right thing to do but they should also have the confidence to do what the legislation allows them to do," added Marshall.