Regulator issues report on Polestar Pension Scheme

The Pensions Regulator has today issued a report under Section 89 of the Pensions Act 2004 on the Polestar Pension Scheme following the trustee’s announcement to members that the scheme is to be wound up.

 

The company that had supported the scheme changed hands in April 2011, meaning the payments upon which the trustees were depending were no longer available. The trustee submitted a 40-year recovery plan reliant upon a substantial degree of investment outperformance.

 

Based on this information, the regulator concluded that full funding of the scheme over any reasonable period was unlikely and that the scheme should be wound up in the interests of the generality of its members and the Pension Protection Fund (PPF). After receiving professional advice, the trustee agreed with the regulator’s view. The trustee has now written to members informing them of its decision to wind up the scheme.

 

Executive director for defined benefit (DB) regulation Stephen Soper said:

 

“With no employer support, the funding gap between the scheme’s assets and liabilities could only be closed through taking excessive investment risk. This would not be in the best interests of the generality of members or PPF levy payers. We therefore believe that the trustees’ decision to wind up the scheme is the right one.”

 

He added:

 

“As part of our developing approach to regulating the different segments of the DB landscape, we will work proactively with the trustees of the small number of pension schemes where employer support is so weak that they have little or no chance of paying the benefits promised.

 

“In these cases, investment risk should only be taken to the extent that any downside can be underwritten by the sponsoring employer. We encourage trustees to approach us to discuss the issues they face in order to reach the best possible solution for members and PPF levy payers.”

1.      Section 89 of the Pensions Act 2004 gives The Pensions Regulator the ability to publish a report of the consideration it has given to the exercise of its functions in relation to a case.

 

2.      The Pensions Regulator is the regulator of work-based pension schemes in the UK. We have objectives to protect members’ benefits, reduce the risk of calls on the Pension Protection Fund (PPF), promote and improve understanding of the good administration of pension schemes, and from 2012 will have the additional objective of maximising employers’ compliance with their duty to automatically enrol staff into a qualifying pension scheme with a minimum contribution rate. Our approach is risk-based focusing on education and enablement, with enforcement where appropriate. Whilst our priority is to ensure that trustees, employers and intermediaries are well-placed to manage schemes effectively, the regulator can exercise powers where it feels it is reasonable and proportionate to do so. These powers include the ability to:

• collect information about pension schemes: through scheme returns, under the scheme funding regime and 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 (CN) where there is an attempt to avoid liabilities, or a financial support direction (FSD) where the employer is a service company or insufficiently resourced; and
• from 2012, issue warnings and penalties to employers for failure to enrol staff into a qualifying pension scheme.

• David Hannant: 01273 811824
• Katherine Long: 01273 811859
• Ben Lloyd: 01273 627208
• Out of hours: 01273 648496