UK - Pension law firm Sackers has criticised the stance taken by the UK Pensions Regulator (TPR), as well as Lehman Brothers and Nortel Networks UK (NNUK), during a recent court case over the regulator's Financial Support Directive (FSD).

TPR earlier this year issued a £2.1bn FSD against NNUK and several overseas entities after the UK sponsoring company went into administration in 2009.

A similar FSD was later issued against Lehman Brothers, after the collapse of the bank left its UK pension scheme with a £148m funding gap.

Sackers explained the legal arguments put forward during the ongoing court case, saying that both companies argued an FSD should not entitle a pension scheme to claim in administration, while TPR claimed that liabilities should be viewed as an expense and given priority over other creditors.

Peter Murphy, head of Sackers' regulatory unit, said: "The positions taken by both the administrators and the Pensions Regulator seem rather extreme. The Court may well try to find a more moderate route somehow - although it is not clear whether such a route exists."

Meanwhile, Towers Watson reported over a third of plan sponsors expect to conduct a risk transfer deal in the next five years.

Additionally, more than half are expecting a redesign of their defined benefit (DB) scheme, the consultancy found as part of its Pension Risk Management Survey 2010.

Ravi Rastogi, senior investment consultant, said there would be increasing use of swaps, options and other derivatives to improve risk management.

"There is also an ambition to better align assets with liabilities through liability-driven investment, insurance solutions and liability transfer, liability redesign and investment governance improvement," he said.

"Pension funds continue to improve their governance structures, allowing them to successfully implement more sophisticated investment strategies, which include diversification into the full range of alternative assets, as well as having an increasingly dynamic approach to investment."

Rastogi added that pension funds now acknowledged the risks of not diversifying their portfolio sufficiently, with a shift away from equity-focused portfolios and 38% of respondents planning a de-risking strategy over the next five years.

Mark Duke, senior consultant at Towers Watson, said: "Most companies cannot completely de-risk overnight, especially if they are relying on investment returns to help repair pension deficits, but they are putting strategies in place to make the ride less bumpy. 

"For some companies that agreed funding plans when deficits looked even worse, the market recovery has created opportunities to de-risk without having to make more cash available."

Finally, the National Association of Pension Funds (NAPF) today issued guidance for UK schemes considering adopting the Stewardship Code.

The organisation said it "strongly encouraged" pension funds to sign up to what it called an important policy document.

David Paterson, the NAPF's head of corporate governance, said: "The discussions we have recently had with our members are encouraging. They show many investors understand the importance of high standards of corporate governance within UK companies and are committed to sign up to the Code."

Baroness Sarah Hogg, chair of the Financial Reporting Council, who drew up the Code, said the recent crisis demonstrated short-term behaviour destroyed long-term value.

"While the code is aimed primarily at fund managers, pension funds naturally have a long-term focus and can have a beneficial impact on the behaviour of both boards and investment managers," she added.

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