The Pensions Regulator (TPR) has used its anti-avoidance powers against SMT Scharf AG, a German mining equipment business with global interests and subsidiaries, it revealed today.

According to TPR, in 2013 SMT Scharf sold the Dosco Group, a UK-based engineering business, to a management buyout company that had no realistic prospect of being able to support the business.

As a result, the sponsoring employers of the Dosco Overseas Engineering Limited (1973) Pension & Assurance Scheme, a 600-member defined benefit (DB) scheme, went bust eight months after the sale and the scheme entered into an assessment period with the Pension Protection Fund (PPF).

TPR’s intervention led to a contribution notice against the former German parent company for just over £2m (€2.4m), and a settlement of about £130,000 was secured with a former chief executive of the Dosco Group, Martin Cain.

Nicola Parish, executive director of frontline regulation at TPR, said the case showed that a target being based overseas “is no obstacle to the use of our anti-avoidance powers”.

“Scharf showed a complete disregard for the scheme which was left with no funding or prospect of financial support,” she said.

“We put savers at the heart of all we do and we take an extremely dim view when their interests are deliberately neglected in this way.”

Last year the Department for Work and Pensions published a consultation on draft regulations introducing two new events that trustees and sponsors of DB schemes are supposed to notify TPR of. The industry is waiting for the government’s response.

More details about TPR’s case against Scharf can be found here.

£33bn of pension liabilities changed hand in M&A activity in 2021

Defined benefit liabilities worth £33bn changed hands in major mergers & acquisition activity in 2021, according to analysis of reported transactions by consultancy LCP. 

It said this was 24 times the volume transacted in the previous 12 months and still exceptional by historical standards even if COVID fears may have been the cause behind a muted 2020. In 2015 for instance, LCP said, only £5.5bn of pension liabilities transacted.

The Pension Schemes Act and new rules laid out by TPR have increased the clarity regarding what is expected of buyers when it comes to dealing with pensions in big transactions.

Alex Waite, partner and M&A specialist at LCP, said these new rules do create the need for a more thorough transaction process, but were helpful “for those buyers who want to deal with their future pension commitments responsibly”.

“M&A deals can be incredibly complex and for many buyers the prospect of dealing with the technical details of transferring pension liabilities has historically been a headache,” he said. “However, as 2021 shows, it’s now no longer the case that it’s a ‘no-go’ area for many buyers.”

FCA proposes £71.2m compensation for ex-British Steel Pension Scheme members

The UK financial services regulator has published plans for a £71.2m compensation scheme for former members of the British Steel Pension Scheme (BSPS) who received unsuitable advice to transfer out of the defined benefit fund.

Under the proposals, firms would need to review their advice and compensate consumers if the unsuitable advice caused them financial loss.

The Financial Conduct Authority (FCA) expects the scheme will cover 1,400 BSPS members and £71.2m in total redress.

The consultation, which the FCA in December said would be coming subject to final board approval, is open until 30 June 2022. If confirmed, the FCA will publish rules setting out how advisers must determine whether they gave unsuitable advice and whether they must pay compensation.

The scheme would be in place by early 2023, with consumers starting to receive compensation from late 2023.

The FCA has found that almost half of the advice it reviewed relating to BSPS was unsuitable.

“The circumstances around BSPS transfers were exceptional, with former members receiving significantly higher levels of unsuitable advice compared with other cases,” said Sheldon Mills, executive director for consumers and competition at the FCA.

“We want individuals who lost out financially after receiving unsuitable advice to receive compensation through our scheme.”

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