The Pensions Regulator has announced it will no longer proceed with regulatory action against stockbroker MF Global, after the scheme’s trustees secured sufficient funds to buy out members’ benefits in a similar level promised prior to MF Global UK’s administration.
The Pensions Regulator has today (22 October) issued a report under Section 89 of the Pensions Act 2004 setting out its regulatory actions in respect of the UK defined benefit pension scheme of MF Global.
On 31 October 2011, MF Global UK Ltd and MF Global UK Services Ltd, which provided employee and pension services for the UK operations of the MF Global group, went into administration.
The group operated a defined benefit pension scheme in the UK, the MF Global UK Pension Fund, which had a deficit of around £35m on a buy-out basis at the time of the group’s insolvency in October 2011.
Shortly after the group’s insolvency, the regulator began an investigation to determine whether it would be appropriate to issue a Financial Support Direction to MFGUK and other entities within the MF Global group.
The regulator said it worked closely with the scheme trustees to finalise a warning notice making the case for a Financial Support Direction, which it intended to issue by 30 October this year.
Parallel to the regulator’s investigation, the trustees of the scheme entered into discussions with special administrators KPMG to reach an early settlement of their claim against the group.
However, on 16 October, the trustees and KPMG announced they had reached a settlement as a result of which a “significant payment” was made into the scheme.
With this payment, the trustees were able to secure a buy-out with an insurer and the scheme will now wind up outside the Pension Protection Fund.
The regulator said this settlement means that members will now receive benefits broadly equivalent in value to those that they had been promised before MFGUK went into administration.
In light of this settlement, the regulator will now not proceed with regulatory action.
Geoff Cruickshank, The Pension Regulator’s interim executive director for defined benefit regulation, said: “We are pleased with the outcome of this case, which demonstrates how the regulator’s ‘moral hazard’ powers can prove influential in bringing about an acceptable settlement.”
