The Pensions Regulator

Regulator uses anti-avoidance powers on Sea Containers

Ref: PN07-10
18 June 2007

The Pensions Regulator has today (Monday) published Determination Notices indicating the intention to issue its first Financial Support Direction (FSD) on passenger transport and marine container leasing company Sea Containers Ltd (SCL).

The regulator believes that SCL as a parent company must provide financial support for the two pension schemes of its London-based UK subsidiary Sea Containers Services Ltd (SCSL).

Chief executive Tony Hobman said: "Our anti-avoidance powers are significant and, as we have always stressed, we will use them proportionately and where reasonable. In this case, we concluded that the issue of a Financial Support Direction was appropriate and justified."

Sea Containers Services Ltd is a service company and taking into account all of the circumstances the regulator's Determinations Panel deemed it reasonable to determine to issue a FSD.

At a Determinations Panel hearing on June 12 and 13, representations were heard from the Pensions Regulator, the trustees of the 1983 and 1990 SCSL pension schemes, and Sea Containers Ltd. The Determination Notices may be viewed on our website. The reasons of the Determinations Panel are reserved and will be issued by Monday 25 June.

The Financial Support Direction will be issued 28 days from the date of the determination notice. During this 28-day period an appeal may be made.

Editor's notes

1. The Determination Notices indicate the intention to issue the regulator's first Financial Support Direction. A FSD requires a sufficiently resourced connected or associated party to support a final salary pension scheme within a group. Under the Pensions Act 2004 an FSD may be issued where the regulator concludes that the sponsoring employer is a service company or is insufficiently resourced, and it is reasonable to do so. The Act states that if a FSD is ignored, the regulator may issue a Section 47 Contribution Notice for a specific sum. A statutory debt then exists which can be pursued through the civil courts. (Pensions Act 2004 Section 43 - 50.)
2. The trustees of the two schemes have issued a joint statement indicating their support for the determinations. For a copy of the statement contact Nicholas Couldrey at Sacker & Partners on 020 7615 9524 (1983 scheme) or Simon Price at Hammonds on 020 7655 1000 (1990 scheme).
3. A Warning Notice regarding the issue of a FSD was sent to the parent company Sea Containers Ltd in October 2006. Both SCL and the trustees of the two pension schemes made representations to the regulator following this notice. The regulator decided it was appropriate to proceed to Determinations Panel and the hearing took place on 12/ 13 June 2007.
4. The Pensions Regulator Determinations Panel is the decision making body of the regulator. Where the regulator wishes to exercise its anti-avoidance powers it is required to provide submissions to the panel. A decision is made by the panel as to whether the use of the power is appropriate and a determination notice is issued setting out the reasons for the decision. Our website provides more information on the panel and the determinations process.
5. The Pensions Regulator is the regulator of work-based pensions in the UK, with wide-ranging and flexible powers under the Pensions Act 2004. The powers of the regulator include the ability to:
   • collect detailed scheme information;
   • 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.

     The Pensions Act 2004 also imposes a statutory obligation on 'whistleblowers' to report suspected breaches of the legislation to the regulator.