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19/03/2018

Pensions White Paper misses vital insolvency reforms

Commenting on the Government’s Defined Benefit Pension Scheme White Paper, published today, Duncan Swift, deputy vice-president of insolvency and restructuring trade body R3, says:

“The Government’s proposals do not tackle some key pensions and insolvency issues. Top of the list for the insolvency and restructuring profession, but missing from these proposals, is the need to untie the Pensions Regulator’s hands and allow it to discuss scheme restructuring options for struggling businesses at a much earlier stage than it does now.

“Current rules force the Regulator to wait until insolvency is ‘inevitable’ within 12 months before it can come to an agreement with a company, but by this point it’s usually far too late to get the best deal for the pension scheme members, the Pension Protection Fund, or the company. Engagement must come earlier.

“In the White Paper, the Government says it will commit to ‘work closely’ with stakeholders to look at ways to improve the pensions restructuring process, but action is needed sooner rather than later.

“Another really important area for change is the relationship between scheme trustees and the scheme sponsor. Information provided to trustees can be limited and trustees may struggle to have a clear picture of the viability of a scheme’s rescue plan. The White Paper does introduce more responsibilities for trustees, but not a huge deal in the way of additional support beyond the positive work the Regulator already carries out.

“Action on Defined Benefit pensions is needed, particularly in relation to insolvency situations. How rapidly the Government can bring these reforms in, and how far these proposed reforms will change after having been announced, are key questions.”

“There are some positives in the proposals. Plans for compulsory Pensions Regulator clearance of certain corporate transactions have been dropped, for example. The Regulator already has extensive powers to take action on transactions which have been detrimental to a pension scheme, while it would have been potentially unfair to other unsecured creditors, such as HMRC or suppliers, who do not have their own clearance mechanism.”

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see www.r3.org.uk for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
     
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.