Too Big to Fail?: Corporate Failure 2 July 2018

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Presentation transcript:

Too Big to Fail?: Corporate Failure 2 July 2018 The impact of Occupational Pension Schemes David Pollard Wilberforce Chambers wilberforce.co.uk

Occupational Pension Schemes UK Defined Benefit (DB) schemes Uncertain amount/timing of benefits Estimated liability = NPV Crucial issue is discount rate Company/employer accounts = AA bonds On-going funding = “prudent” (as agreed between trustees and employer) Termination = insurance buy-out (s75) wilberforce.co.uk

UK DB Schemes Trustees/PPF are major creditors of employer: Pre insolvency = contingent claims Post insolvency = s75 debt Trustees/PPF will exercise creditor powers / review decisions The Pensions Regulator (TPR) = ongoing supervisor Information powers “Moral hazard” powers Funding / reports wilberforce.co.uk

On-going position – employer position Funding/support: Potential trapped surplus? Director duties? Corporate transactions: Impact on employer “covenant”: Dividends Grant of security Asset/ Business Sales Loans wilberforce.co.uk

High Profile cases HC Work and Pensions select committee Newspapers BHS Carillion Newspapers TPR Information powers Role for insurance? wilberforce.co.uk

Scheme Funding changes Stronger TPR: Consultation (June 2018) March 2018: Govt White Paper: Protecting Defined Benefit Pension Schemes Scheme Funding changes Stronger TPR: Consultation (June 2018) New crimes, civil penalties (up to £1m) New notifiable events Employers/parents: “Declaration of intent” Changes to CN and FSD powers wilberforce.co.uk

Stronger TPR: Consultation (June 2018) New crimes: March 2018: Govt White Paper: Protecting Defined Benefit Pension Schemes Stronger TPR: Consultation (June 2018) New crimes: “wilful or grossly reckless behavior in relation to” a DB scheme Non-compliance with a CN Failure to comply with a notifiable event duty Targets = sponsoring employers and associated persons wilberforce.co.uk

Too big to fail? End result? Insurance? Pension deficits – seen as quasi-super creditor? Seek further TPR involvement? Investors more concerned? Lenders concerned? Insurance? wilberforce.co.uk

Too Big to Fail?: Corporate Failure 2 July 2018 The impact of Occupational Pension Schemes David Pollard Wilberforce Chambers wilberforce.co.uk