Pensions Regulator: anti-avoidance powers and notifiable events

27 April 2009

The Pensions Regulator ("Regulator") has amended the list of notifiable events that have to be communicated to his office.  From 6 April 2009, it is no longer necessary to notify the Regulator of the following events:

• A change in the employer’s credit rating;
• Two or more changes of scheme actuary or auditor in the previous 12 months; and
• Two or more changes in the employer’s chief executive or finance director in the previous 12 months.

The changes have been made as part of the Regulator’s drive to assist schemes during the current recession.

The Regulator’s latest three year corporate plan ("the plan"), which sets out his objectives from 2009 to 2012; has recently been published.  Within theme two of the plan, there is a section entitled “Reducing risks to DB scheme members: Market transitions” which states:

"...The Pensions Act 2008 included provision for a proportionate extension of our powers to intervene in the market place in certain circumstances.  The Regulator’s new powers should generally assist us to intervene... We will maintain our approach of education, enabling and enforcing only where appropriate, and we therefore expect to use these powers very rarely..." (Corporate Plan 2009-2012; page 20)

This statement from the Regulator is specifically aimed at the number of developments in the pensions buyout market.  The emergence of new providers and business models has been welcomed by the Regulator.  On the other hand, the Regulator is determined to ensure that risks relating to such models and new providers are to be effectively and appropriately managed.  The way in which this will be done will largely be accomplished by non-interventionary means, wherever possible.  Whilst intervention has not been ruled out altogether, it is an implicit acknowledgement from the Regulator that he and the pensions industry is operating in an economic climate far removed from the context in which the Regulator’s office was first initiated in April 2005, and that there is a need to approach certain pension matters with a lighter touch than before.

However, the Regulator is determined to ensure that schemes undertake their legal obligations.  The Regulator will intervene where it is appropriate and proportionate to do so.  The use of the Regulator’s powers in high profile cases such as Ericsson, Sea Containers and Telent have:

"...sent strong and clear signals to the market, and we believe that the threat and use of regulatory powers serve as an effective instrument in driving positive market behaviour.  We have dealt with a significant number of cases where this has been evident."  (Corporate Plan 2009-2012, page 6).