The Pensions Regulator has published a report on its dealings with the Halcrow Pension Scheme and its sponsoring employer, defending its own practices and the way it uses its powers.

The regulator said it worked with the scheme’s sponsoring employer Halcrow Group Limited, an engineering company, and its US owner CH2M Hill, as well as the scheme trustees to keep the scheme from falling into the Pension Protection Fund and keep the company solvent.

TPR chief executive Lesley Titcomb explained that the agreement gives members the option to transfer to a new scheme providing pensions above PPF compensation levels. As a result, members now have until 5 August to decide whether or not to enter the new arrangement. If their response is not submitted by that deadline then they will be automatically transferred to the PPF.

The regulator said the case highlights how it is able to work quickly to agree complex pension restructuring plans, called Regulated Apportionment Arrangements (RAA), if it has the co-operation of the parties involved and receives credible proposals.

Lesley Titcomb, Chief Executive of TPR, said: “The agreement in this case gives members the option to transfer to a new scheme providing pensions above PPF compensation levels, while also preserving jobs and growth by avoiding HGL’s insolvency. We were satisfied that this was the best available outcome in challenging circumstances. It has been a difficult time for members and we are pleased that the pension trustees are now consulting them about their options.

“This type of pension restructuring is rare, and we will only agree where stringent tests are met, so that they are not abused. However, this case also clearly demonstrates that when we receive the information we require from co-operative employers and scheme trustees, we can use the tools available to us as part of the regulatory framework to agree innovative restructuring solutions.”

As a result of approving the RAA, the scheme will receive £80m as a cash lump sum, which is more than it would have received in the insolvency of HGL, plus a minimum 25 per cent, and maximum 45 per cent, equity stake in HGL. In practice, this will be split between the new scheme and the PPF, depending on the number of members who choose to transfer.

Buyers of pension scheme sponsors are not automatically responsible for funding or making contributions to that pension scheme. The regulator’s anti-avoidance powers enable it to impose such a responsibility if it thinks it is reasonable to do so and the legal criteria have been met.

At the time of the purchase of HGL by CH2M in 2011, and again in connection with the RAA proposal, TPR considered it would not be reasonable to use its powers. In considering this it took into account the agreement reached, the fact that CH2M provided significant financial support to HGL and continued to fund the contributions due to the scheme under the 2008 valuation.

The report comes as the regulator’s processes are under scrutiny by the Work and Pensions Committee following the BHS collapse. During one of the evidence sessions for BHS, former BHS finance consultant Michael Hitchcock said the TPR’s and PPF’s processes are ‘not fit’ for the current commercial world.

The Work and Pensions Committee has launched its own inquiry into the regulator and the PPF looking at the adequacy of DB pension scheme regulation and regulatory powers, in general and specifically in relation to the pension schemes of complex and multi-national companies.

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