Rules which cover the restructuring of companies, and their commitments with regard to employees’ retirement when they are under strain, have been tightened by the Pension Protection Fund.
Pension scheme members will benefit from the rule changes, acccording to the PPF, which stated in a note it is not obliged to consider a restructuring proposal and to do so, its new criteria must be met.
Under the new rules, the PPF stated it will only back a refinancing if the fees charged by the banks involved in the restructuring are deemed reasonable.
Also the greatest cost burden will fall on the company or investors seeking the deal.
Additionally, the note explained the PPF works closely with The Pensions Regulator to ensure they do not ‘dump’ schemes in the PPF.
In June this year, the Pension Protection Fund criticised a radical government proposal to cut benefits for members of the British Steel Pension Scheme, saying it would not want to insure a scheme that did not have a proper sponsoring employer.
At that time, the PPF, in its public consultation document, stated that under the government proposals the British Steel Pension Scheme would almost certainly be separated from its sponsoring employer, Tata Steel.
According to the PPF, this separation would leave the scheme highly vulnerable to market volatility, and make the scheme an even more likely candidate to fall into the PPF than it already is.
Malcolm Weir, head of restructuring and insolvency at the Pension Protection Fund said regulated apportionment arrangements were rare, and the PPF does not agree to them lightly.
“We will only support such proposals if they provide a significantly better return for the pension scheme than it would receive through the normal insolvency process.
“These arrangements can sometimes be controversial, so we feel it is important that people have a better understanding about our approach to them.”