Conservative Manifesto: Hogan Lovells comments on pensions

The Conservative Party's Manifesto, issued today, should be essential reading for businesses with large defined benefit pension schemes, as it proposes significant new regulatory changes.

Edward Brown, partner at Hogan Lovells said: "The manifesto proposals represent a radical change in pensions regulation. Whilst many people will welcome tougher measures to combat bad practice, mandatory involvement of the Pensions Regulator on corporate transactions may result in increased cost and delay for legitimate business activity. Company directors will also need clarity on exactly what behaviour is intended to be covered by the potential new criminal offence."

The key promises are:

  • Mandatory notification to the Pensions Regulator of "mergers, takeovers or large financial commitments that threaten the solvency of the scheme";
  • New powers for the Pensions Regulator to "scrutinise, clear with conditions or in extreme cases stop" these transactions from happening; and
  • Punitive fines for "those found to have wilfully left a pension scheme under-resourced";
  • Consider introducing a new criminal offence for company directors who "deliberately or recklessly put at risk the ability of a pension scheme to meet its obligations."

Edward Brown added: "Whilst some regulatory changes were expected post BHS, the Manifesto is far more radical than the cautious DWP Green Paper in February. Whether this will have the effect of stopping another BHS, or simply add cost and delay to legitimate commercial transactions, may depend on the approach the Pensions Regulator takes in practice."

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