The current UK government have announced plans to crack down on the safeguarding of pensions during takeovers for businesses. Should the Conservatives win the general election in early June then a tightening of the rules will come into play sometime in the future. While this is aimed at protecting workers and their future financial interests, it will also have an impact on businesses across the country.
What’s the plan?
Essentially, the plan is to tighten the rules on the safeguarding of pensions during takeovers and increase the punishments dished out for those mismanaging such schemes. Under a Conservative government, the Pensions Regulator would be handed more power to examine takeovers and unsustainable dividends payments which could threaten the state of a company pension scheme.
Where the solvency of a pensions scheme is at risk and there is no plan in place to protect it, the Pensions Regulator will have the power to block a takeover. Businesses which have left a scheme under-resourced will also be eligible to be issued punitive fines. For more serious cases, company directors could be struck off for a certain amount of time, with the possibility of a new offence being introduced to make it a criminal act.
Why the tougher regime?
As well as looking to protect the pensions of workers, the tougher regime is being devised now partly in reaction to the chaos that occurred with BHS. The owner, Sir Philip Green, had to hand over £363m to the Pensions Regulator to rescue the BHS pension scheme. This was after the company collapsed and left a pension deficit assessed at £571m.
There was a public outcry as 19,000 former workers had to be compensated but only after the Pensions Regulator intervened. By making it a criminal offence and introducing fines for mismanagement, company pension plans will hopefully be better protected.
The effect on businesses
For businesses, should these new rules be introduced, it will mean they will all have to be a lot tighter and more careful when overseeing their pension plans. Especially when brokering deals, takeovers, mergers and acquisitions, those over a certain value with a set number of pension scheme members will have to notify the Pensions Regulator.
Certain conditions will then be applied and the business will have to ensure they can be met, otherwise it will have to face the consequences. Those most at risk of this will need to ensure whoever is in charge of the pension scheme is aware of the new regime and how best to manage it.
For individuals who are still worried about the future of their pensions even with these new rules, or should they not come into place, there are ways to further protect your retirement savings. Tilney offer financial planning and investment services for your personal wealth, outside of company pensions. Or taking out a self-invested personal pension (SIPP) could be another route to take.
The tightening of company pension rules could be coming into action as early as June this year, so businesses must be prepared for such changes.