2010
Regulator announces determination on first Contribution Notice
Ref: PN10-11
Tuesday 29 June 2010
A determination to issue a £5m Contribution Notice (CN), in relation to the Bonas Group Pension Scheme (PDF), has been published by The Pensions Regulator.
The decision, published today on the regulator’s website, is the regulator’s first CN determination.
The Pensions Regulator’s Determinations Panel found that Michel Van De Wiele N.V. (‘VDW’) – the parent company of textile machinery business Bonas - had retained the Bonas business while avoiding the pension liability, by placing Bonas into a pre-pack insolvency, and had not engaged openly with pension trustees or the regulator. VDW has appealed the decision.
Bill Galvin, the regulator’s acting chief executive, said:
"Much of the regulator’s effort to secure funding to schemes occurs through a process of discussion and negotiation, working with trustees and pension scheme sponsors.
“But where attempts are made to avoid companies’ pension obligations we will use our ‘moral hazard’ powers to protect members’ benefits and the Pension Protection Fund.”
Although this is the first CN issued by the regulator, the existence of the regulator’s moral hazard powers has lead to hundreds of millions of pounds being paid to pension schemes. However, agreement is reached in most cases without formal enforcement action being required.
The Determination Notice relating to Bonas was issued by the Determinations Panel on 14 May. This was followed by a statutory 28-day period enabling VDW to decide if it wished to appeal by making a reference to the Upper Tribunal.
The regulator’s approach is based on education and enablement, working closely with sponsors and trustees to ensure schemes have viable funding in place, and enforcing only where necessary to secure outcomes for members and the PPF.
The regulator previously used its anti-avoidance powers in the Sea Containers case in 2007.
Editor's notes
- A Contribution Notice (CN) requires a specified amount of money to be paid into a pension scheme by an individual or a company. In this case, a determination to issue a CN was issued under the ‘main purpose’ provision as detailed in the Pensions Act 2004, where the targets undertook an act with the main purpose of preventing the recovery of the whole or any part of the section 75 debt due from the employer.
- The Bonas Group Pension Scheme entered into the PPF assessment period in January 2007 and formally transferred into the PPF in November 2008.
- The Pensions Regulator is the regulator of work-based pension schemes in the UK, with objectives to protect members' benefits, promote good administration and reduce the risk of calls on the Pension Protection Fund. Our approach is risk-based focusing on education and enablement, with enforcement where appropriate. We have the ability to:
- collect information about pension schemes; through scheme returns, under the scheme funding regime and as well as statutory (including whistleblowing) reports;
- issue notices requiring actions to tackle non-compliance, prohibit trustees who are judged not fit and proper to carry out their duties or appoint independent trustees;
- direct pension schemes as to how to calculate their liabilities and the contributions required;
- issue a Contribution Notice where there is an attempt to avoid liabilities, or a Financial Support Direction in appropriate circumstances where the employer is a service company or insufficiently resourced.
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