While the Confederation of British Industry (CBI) has welcomed the reassurance that the extended powers would not be seeking to hamper normal business activity, lawyers have warned that ambiguity over when the regulator can intervene is handing an unreasonable level of power to trustees.
Both the minister for pensions reform, Mike O’Brien, and the regulator, have stated that the new powers are largely concerned with ‘new business models’. These look to sever the link between the employer and the pension scheme in order to operate such schemes for profit.
They added that the overwhelming majority of pension schemes would not be affected by the proposed changes.
In response, a measured welcome came from both the CBI and the Engineering Employers Federation.
Neil Carberry, pensions policy manager at the CBI, said: “We welcome this clarification that any retrospective powers for the regulator will only be used under certain specific circumstances, including non-insured pensions buyouts.
“But it is essential that the final powers also take a targeted approach that properly regulates this sector, without a wider negative impact on M&A and other corporate activity, which is already covered effectively by the 2004 act.”
However, lawyers have pointed out that it will be difficult to give legal advice on corporate transactions while the new powers are not written in law.
Ian Greenstreet, partner at Nabarro Nathanson, said: “The real driver here is that, with contributions notices, you are talking personal liability for directors, so that is quite scary. If you are an individual director you are going to want pretty robust advice before going ahead without a clearance.”
He added: “If you go for clearance then you give trustees leverage to extract a very large price. If the legislation is too vague, it is going to give trustees great leverage in situations where employers might argue they should not have.”
David Rowley
