Defined Benefit 

Regulators warned contractor about pension transfers

Regulators warned contractor about pension transfers

Members of the largest Interserve pension scheme were warned last year about the possibility of being a target for pension transfers after intervention from The Pensions Regulator.

The watchdog, alongside the Financial Conduct Authority, started signposting members to The Pensions Advisory Service (now the Money and Pensions Service) last year in cases where there may be speculation or uncertainty around a pension scheme’s future.

Interserve entered administration on March 15 and was sold immediately after, a transaction which maintained the current benefits for its final salary plan members.

In a letter to Independent Labour MP Frank Field, chairman of the Work and Pensions select committee, Nicola Parish, TPR’s executive director of frontline regulation, said that contractor scheme trustees were some of the first ones to be contacted by the regulators regarding pension transfers.

She noted that the purpose of the letter sent to trustees was to provide a "joint message around the risks of transferring out of a DB scheme and how to seek advice.

"This included a letter for the trustees to send to members," she added.

Ms Parish also revealed that the regulator had been in contact with the pension fund trustees about their communications to members following the administration of Interserve, "to ensure that an appropriate level of information has been given to the members.

"We are satisfied with their response to us in that regard," she added.

The first time the watchdog sent a letter detailing how members can get impartial objective information at Tpas was in the British Steel case.

Interserve had been struggling with almost £650m in debt and was on the government’s watchlist amid concerns it could become the next Carillion.

At the time Mr Field questioned TPR about the future of the contractor’s pension schemes.

As part of a deal brokered with lenders the company agreed to swap £485m of debt for shares in the business.

The pension schemes meanwhile were promised £15m in contributions per year for an additional four years.

Interserve sponsored the Interserve Pension Scheme, a final salary plan closed to future accrual in 2009, which had a £93.9m surplus based on the IAS 19 accounting measure in 2018, compared with a £48m deficit at the end of 2017.

This improvement was due to the trustees of the scheme changing the indexation on future pension increases from the retail price index to the consumer price index. RPI generally runs at about 1 percentage point higher than CPI.

Ms Parish said during the restructuring process TPR will remain engaged and monitor the financial position of the business periodically.

maria.espadinha@ft.com