The Pensions Regulator

Pensions Regulator chairman addresses annual NAPF conference

Ref: PN05-14
12 May 2005

Chairman of the Pensions Regulator, David Norgrove, today addressed the annual conference of the National Association of Pension Funds (NAPF).

In his speech, David Norgrove highlighted the need for trustees and employers to work together closely in order to reduce pension scheme deficits. He urged employers to co-operate fully with trustees in sharing all relevant information.

He said: "The ideal has to be a well advised and supported group of knowledgeable trustees working in partnership with a strong and committed employer. Even then the trustee will have some tricky things to consider with the company.

The trustees and the company will be expected in the case of a deficit to agree a recovery plan and schedule of contributions. Trustees like any other creditor will need to consider the employer's covenant, and its ability to pay. It's clearly in the employer's interest to co-operate fully because if the trustees don't understand the employer's ability to pay, they may be unable to agree a perfectly reasonable recovery plan."

Norgove emphasised that the role of the regulator would be to facilitate trustee-employer negotiations,

"unless there is an immediate risk to members' benefits, we for our part won't reach for our powers until we've run out of patience with discussion and negotiation. To do so would go against the spirit of what we're trying to achieve and could undermine the trustee - employer relationship. And this approach is already proving successful."

Outlining the regulator's new clearance procedures, David Norgrove said:

"the first key principle is that the defined benefit pension scheme should be given the status that would be accorded to any other material unsecured creditor. And the second is that the regulator will only be concerned to know about events having a materially detrimental effect on the ability of a defined benefit scheme to meet its liabilities."

He went on to describe the requirement for the regulator to balance protection of benefits against protection of jobs and the circumstances in which a scheme might be allowed to fall into the Pension Protection Fund in return for an agreement with other creditors in which the scheme would gain an equity stake in a new company.

He concluded, however, by saying that the regulator would keep its eyes firmly on the goal of protecting members' benefits.

Editor's notes

1. The National Association of Pension Funds (NAPF) annual conference runs from the 12 to 13 May 2005 and is being held at the GMEX centre in Manchester.
2. The Pensions Regulator is committed to providing the opportunity for face to face communication about key regulatory issues and is represented at this year's conference by its chairman, David Norgrove.
3. A diverse range of pensions and investment professionals is expected to attend the NAPF conference. For further information on the event, please visit www.napf.co.uk.
4. The Pensions Regulator has powers to stop employers avoiding pension liabilities. Powers include contribution notices, financial support directions and restoration orders.
5. Those who are considering corporate transactions which involve companies with defined-benefit schemes can apply to the Pensions Regulator for a clearance statement. This will provide companies with assurance that their transaction does not contravene the anti-avoidance legislation.
6. Clearance statements: guidance from the Pensions Regulator is published on the Pensions Regulators website: www.thepensionsregulator.gov.uk.
7. The Pensions Regulator has been established as the new regulator of work-based pensions in the UK, with wider and more flexible powers under the Pensions Act 2004. It replaces Opra which has ceased to exist.
8. The new powers of the Pensions Regulator include the ability to:
   • collect more detailed scheme information;
   • impose a statutory obligation on 'whistleblowers' to report suspected breaches of the legislation to the regulator;
   • issue improvement notices and third party notices, enabling the regulator to ensure problems are put right;
   • freeze a scheme that is at risk, while the regulator investigates; and
   • prohibit trustees who are judged not fit and proper to carry out their duties.