Ignoring trustees is very risky

Author: | Published: 1 Dec 2008

The pensions aspects of acquisitions are taking an increasingly central role as pension scheme deficits increase and scheme trustees look to take security alongside more traditional creditors. The Pensions Regulator may also take action to require investors to contribute to a company's pension scheme, even after exiting the business.

The Pensions Act 2004, which established the Regulator, and the Pension Protection Fund (PPF), armed the Regulator with a set of moral hazard powers. The powers were intended to allow the Regulator to prevent companies from abandoning under-funded pension schemes, leaving the PPF to pick up the shortfall.

The government is increasing the Regulator's powers in reaction to what are perceived to be new ways in which companies may try to cut their under-funded pension schemes adrift. Concern has focused on disposals of sponsor company assets and business models where a pension scheme is bought to be to run for profit...