The Labour Party has vowed to protect people’s pensions by toughening up merger and acquisition legislation.

Addressing delegates at the Labour Party Annual Conference, Labour Shadow Chancellor of the Exchequer John McDonnell said that under the next Labour government there will be “no more Philip Greens” as they will “clamp down on the abuse of power at the very top”.

The former owner of BHS, Green has been blamed for the demise of the retail chain by the Work and Pensions Select Committee. As a result, the MPs have said Green must “act now to find a resolution for the BHS pensioners.” However, despite claiming he is working on a solution for the pensioners he is yet to handover any money.

“We will legislate to rewrite company law to prevent them, we will introduce legislation to ban companies taking on excessive debt to pay out dividends to shareholders and we will rewrite the tax takeover code to make sure every takeover proposal has a clear plan in place to pay workers and pensioners. We will protect their pensions,” McDonnell said.

Commenting on the proposal, LCP partner Bob Scott described McDonnell’s intentions as “laudable” but warned that such legislation could have unintended side-effects.

“For example, most pension funds hold company shares and restricting dividends would potentially reduce the returns earned by those pension funds. Also, the more stringent the requirement to fund existing defined benefit pension schemes, the less money is available to fund pensions for existing employees, the vast majority of whom are in defined contribution plans,” he said.

“I wonder too whether John McDonnell’s proposed legislation would have been effective in preventing the collapse of BHS with an underfunded pension scheme had it been the law 15 years ago. I suspect it wouldn’t have been.

“Hard cases make bad law. Whereas it is right that MPs should examine what went wrong with BHS and learn lessons for the future, a careful and balanced approach to future regulatory changes is, in my view, more likely to be effective than a knee-jerk reaction to a particular situation.”

The former PPF chair Lady Barbara Judge has previously proposed that The Pensions Regulator should be given greater powers when it comes to the securing of pensions in the business of M&As.

However, Eversheds partner Jeremy Goodwin said Filing a simple form with The Pensions Regulator detailing the exact terms for every merger and acquisition deal taking place creates “a real danger” of “tying up those companies with DB schemes”.

Share Story: