The regulator has the power to force companies to pay into pension funds if
it finds that a company transaction places a pension fund at risk.
Companies can either be served a contribution notice, requiring a direct cash
payment into a fund, or a financial support direction, which requires non-cash
support or securitisation for a pension fund.
Companies have the option of obtaining clearance for a transaction from the
regulator in advance to avoid this happening.
Dealmakers have complained, however, that the clearance process has taken too
long to complete and has delayed transactions such as acquisitions, public to
private deals and share buybacks. Former CBI director general Sir Digby Jones
even went so far as to say that the Pensions Regulator had ‘nationalised’ merger
& acquisition activity.
Fiona Crisp, head of corporate risk management at the Pensions Regulator,
however, said that delays to the clearance process were mainly caused by the
poor quality of information coming from dealmakers.
‘I can assure you that the quality of information we receive varies
considerably. The information is not always up to standard and this causes
delays,’ Crisp said.
She also called on companies to submit clearance requests in good time and
let the regulator know what deadlines were in place.
‘We respect the pressure of deadlines, and if companies let us know when
deadlines are we will do our best to organise our staff to achieve those dates,’
Pensions Regulator executive director June Mulroy, meanwhile, said it was a
‘myth’ that the criteria for obtaining clearance was too onerous and hindering
‘Our job is to protect pension fund members and make sure that they have a
seat at the table. This does mean that pension trustees have to now be
considered when deals are done, but those negotiations only take up a small part
of the overall negotiations,’ Mulroy said.
Referring to figures to back up her argument, Mulroy said that during the
2005/2006 financial year, the regulator only denied clearance to two deals out
330 applications for clearance that were received. Of these transactions 148
were cleared, 72 were withdrawn and 108 were still in the process of being
negotiated by buyers and sellers.
In the first quarter of the 2006 financial year, which started in April,
applications increased by 90% on the comparative period in 2005. The Pensions
Regulator received 91 applications, of which 24 were approved, one denied, five
withdrawn and 61 continuing.
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