Out-of-court settlement welcomed by Committee
The Committee also today welcomes Tuesday's announcement that TPR had reached an out-of-court settlement with Sir Philip Green over the BHS pension fund deficit, but reiterates its assertion that had TPR been a nimbler, more assertive and more pro-active regulator, it might never have been necessary to get to this stage.
Main key points from TPR's response
The Pensions Regulator response states it is:
- Taking steps to ensure that it moves to enforcement quicker in cases where the use of anti-avoidance powers may be appropriate
- "Making significant efforts to pursue more cases, and to use a wider range of powers where appropriate"
- Supportive of the Committee’s recommendation of schemes being required to submit valuations and deficit recovery plans faster than the current statutory 15 months
- Continuing to explore how small schemes might be consolidated to the benefit of scheme members
- Focusing on becoming "nimbler" through its ongoing TPR Future review of its regulatory approach
The Committee’s report warned that regulatory intervention had been clunky and concentrated at stages when a scheme is in severe distress or has already collapsed and called for TPR be reformed to intervene sooner when difficulties in a company pension fund become apparent, before problems begin to compound.
Faster intervention and punitive charge threat
The Committee insisted that TPR must never again, as it did in the case of BHS, take two years to intervene in a negotiation only to conclude with a 23 year - far too long - deficit recovery plan. It called for Government to consult on a new power for TPR to threaten a punitive charge of up to three times its required pension fund contribution. In the case of BHS that would have equated to the threat of a charge of up to £1 billion, the idea being that this would be sufficient to focus the mind in a timely manner and would rarely or never actually need to be levied.
The Committee also called the Government to consult on new rules for situations where TPR clearance of major corporate transactions is mandatory rather than voluntary, allowing the TPR to decide if a particular proposed corporate change could damage a pension scheme. The collapse of the BHS scheme was not simply a matter of underfunding: it was precipitated by the extraordinary £1 sale of the company to someone who was utterly unequipped to run the company of service its pension deficit.
Rt Hon Frank Field MP, Chair of the Work and Pensions Committee, said:
"The Pensions Regulator was not to blame for the massive deficit of the BHS pension fund. TPR is to be heartily congratulated for securing an out-of-court settlement, avoiding a lengthy, expensive court battle and finally bringing this sorry chapter to a close. But it is clear that had TPR been equipped and prepared to take a more active interest in BHS, earlier, we need never have gone down this path. Pension scheme members cannot rely on all cases having the same parliamentary and public profile as BHS
We welcome the Regulator's acknowledgement of its need to change, which comes just as the Government has published the green paper taking forward our proposal for reform. What is vital now is that the Regulator follows up these promises of change with firm and sustained action. We will be monitoring progress closely. We will be taking further evidence on the BHS settlement and the Regulator's plans for reform."