A consultation process has begun which sees the fallout from the recent high-profile collapses of Carillion and BHS redressed in proposals which include a hefty increase in fines and penalties issued to those responsible for Defined Benefit (Final Salary) pension schemes, additionally widening the scope to include company directors and restructuring professionals.
In the paper, which would see an increase in the powers of The Pensions Regulator (tPR), four new ‘notifiable events’ are outlined as a requirement, and failure to comply sees potential civil fines of up to £1m and additionally, criminal sanctions with unlimited fines and imprisonment.
The proposed procedures fall in line with tPR seeking to tighten up weaknesses exposed over the past months and include notification requirement upon taking pre-appointment advice. This would see the replacement of the current notifiable event of ‘wrongful trading’.
To deter the wilful and reckless loss to a final salary pension plan, failure to notify rules would be extended. Timescales are strict – notification should be made to tPR on the day or day following any given advice – with the assumption that directors should always act in the best interests of the company and its creditors (which inevitably includes final salary pension scheme trustees).
In a departure from the current regulation of notifying tPR when the decision to sell a business or its assets is given ‘as soon as practicably possible’ (in practice this is currently most usually notified post-completion), earlier notification – at Heads of Terms agreement stage – is proposed.
Finally, the proposal to provide a ‘Declaration of Intent’ notification is suggested to encourage employers to consider the effect any transaction would have on the employers covenant responsible for funding a final salary pension scheme. This would be provided to the pension trustees and in due course shared with tPR, prior to completion of any sale or transfer.
It is safe to say that any tightening of regulation will require an increase in time and consideration for all those involved in an insolvency Compliance and transparency has never been more under the spotlight and the severity of the penalties proposed is surely an indication that further, refined regulation will come.
With the provision of specialist services, dedicated, knowledgeable resource, an understanding of regulation and timescales, coupled with firm, long standing relationships with regulatory bodies, pension providers and insurers, Clumber Consultancy is ideally placed not only to reduce the risk of breaches for insolvency practitioners but allows IPs to focus on their strengths in restructuring and best core outcomes for the business.
To understand how Clumber Consultancy can have a positive impact on your organisation, please contact Darren Toms on 07533 110076/01623 821549 or dtoms@clumberconsultancy.co.uk
