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The proposed
extension of the Pension Regulator’s (TPR) powers could prove
damaging to defined benefit (DB) pension schemes, according to PricewaterhouseCoopers
LLP (PwC).
In its submission to the Department of Work and Pensions (DWP) consultation,
The Powers of the Pensions Regulator, which closed on Friday
20 June 2008, PwC asserts that the current regulatory regime is
sufficiently robust and is working well, and there is no evidence
that the Regulator’s current powers do not work.
The firm says that volatility and impact of pension deficits means
sponsors need to seek ways to minimise risk, and innovative solutions
are welcomed in helping sponsors to reduce risk. Any extension of
the Regulator’s powers should be carefully targeted to catch
abandonment only, and the firm says there is a risk that the proposed
changes will result in increased calls on the PPF. Business recover
is likely to be affected if the proposed changes are implemented,
PwC added.
Marc Hommel, partner and UK pensions leader at PwC, commented: “The
current law already enables trustees to seek appropriate mitigation
if a pension scheme’s security is being compromised and the
Pensions Regulator has a number of enforcement powers – many
of which it has so far chosen not to use.
“The proposed extension of the Regulator’s powers will
impact companies’ ability to conduct normal business activity
– for example, re-financing, dividend payments and restructuring
would be exposed to Regulator action.”
Louise Inward, head of pensions at PwC Legal, told Pensions
Age that the extension “also increases the risk that
new investors will not invest in a business with a defined benefit
pension scheme”.
Instead, Inward believes that a focus of power on new buy-outs is
an alternative, and said PwC offers other alternatives as well.
“We made numerous suggestions in our submission about other
changes that could limit undesired consequences.
“There are no real positives to the extension – although
we do welcome the ability to properly direct a contribution notice
to support members who have transferred out,” she added. “Additionally,
it is a positive that we are all having these conversations.”
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Pensions Age June 2008
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