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TPR uses threat of avoidance powers to protect member benefits

Ref: PN16-48
Wednesday 26 October 2016

The Pensions Regulator (TPR) has used its powers as a deterrent to ensure members of a defined benefit (DB) scheme will receive their full benefits, following the sale of the sponsoring business.

TPR believed the sale of data management services provider Database Group Ltd would have led to an insecure future for the scheme. Today TPR issued a regulatory intervention report (PDF, 132kb, 5 pages) on the case highlighting how clearance was granted for an amended deal.

Nicola Parish, Executive Director for Frontline Regulation at TPR, said: "By being approached for clearance we were able to have a seat at discussions and ensure a better outcome for scheme members.

"We had concerns about the risk posed by effectively removing support from the scheme, but understood the commercial rationale and wider benefits of the Merkle acquisition. We opened an investigation and ensured that, through our involvement, members got a better deal.

"This case demonstrates that TPR will consider using anti-avoidance powers in respect of a smaller scheme where appropriate. It illustrates how the existence of these powers can act as a deterrent against possible avoidance activity."

The Database Group Ltd (TDG) was a trading company within the Database Group, a provider of data management services. It was the sole sponsor of the Database Group Ltd Retirement Benefit Scheme - a closed pension scheme with around 100 members and, as at 31 May 2015, an estimated buy-out funding deficit of £7.7 million.

In 2015, an offer was made by an unconnected third party, Merkle Inc, to purchase the shares in the Database Group. The offer was made on the condition that the company be sold without its DB pension scheme and this formed the basis of an application for clearance submitted to TPR in July 2015. 

TPR launched an anti-avoidance investigation to understand the historic trading activity and its effect on the sponsoring business. At the same time discussions between TPR and the applicants and scheme trustees were taking place and a revised proposal to secure members’ benefits in full was submitted. TPR granted clearance. This ensured the security of pension scheme member benefits.

Editor's notes

  1. The intervention report has been published under Section 89 of the Pensions Act 2004 which gives TPR the power to publish information on cases where it has exercised or has considered exercising its powers.
  2. The section 75, £7.7 million relates to the cost of securing all pensions with an insurer.
  3. TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).

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