Photographer: Chris Ratcliffe/Bloomberg

Lawmakers Want to Beef Up U.K. Pensions Regulator After Failures

  • Demise of BHS and trouble at Bernard Matthews raise concern
  • Regulator could block turnaround plans that threaten benefits

U.K. lawmakers are preparing legislation to prevent troubled companies from discarding their pension liabilities during changes of ownership, following two high-profile cases in which retirees could lose retirement benefits after the sale of their former employers.

Frank Field, chairman of Parliament’s Work and Pensions Committee, said he wants to expand the U.K. Pensions Regulator’s powers, including giving it the ability to block rescues of failing companies in certain cases. The push follows the collapse of retailer BHS, which threatens the benefits of 20,000 retirees, and the sale of turkey producer Bernard Matthews Ltd., which allowed the new owner to shed pension liabilities.

Field and other lawmakers criticized the regulator over its handling of the demise of BHS, which shut down this year with a pension deficit valued at as much as 571 million pounds ($726 million). Lesley Titcomb, the regulator’s chief executive officer, said she learned about a sale of BHS that preceded its collapse by reading about it in a newspaper.

“It’s a different world now to when the Pensions Regulator was founded, and we need to change its culture and speed and look at whether we need law changes,” said Field, a member of the opposition Labour Party. “We will be looking at the powers and the culture of the Pensions Regulator and hope that the work of the committee will encourage her to be more on the front foot.”

Pension Bill

In addition to seeking more authority for the Pensions Regulator, which was created in 2004, Field and other lawmakers are considering whether the agency needs tougher powers to demand timely company contributions to underfunded retirement plans.

Field aims to insert amendments into a broader pension bill proposed in May. Details of the amendments have not been decided and will depend in part on evidence being submitted to the cross-party parliamentary committee over the next few weeks, a spokesman for Field said.

The committee has been questioning the regulator over the sale of Bernard Matthews to entrepreneur Ranjit Boparan in a deal that enabled the buyer to take on assets without liabilities such as the pension deficit.

“If Bernard Matthews gets away with it, this will signal a green light to others,” Field said. “It’s very important that the Pensions Regulator is as tough as possible here.”

In a recent letter to Field, Titcomb said she would favor having the power to block some company turnaround plans if pensions are threatened. “Making clearance mandatory in certain circumstances -- where the action weakens the scheme sponsor or where support for the scheme is weakened through corporate activity -- might be considered,” she wrote.

Preserving Jobs

Deloitte, the joint administrator overseeing the sale of Bernard Matthews, has said the agreement with Boparan provided the best deal for the company’s creditors and preserved 1,800 jobs.

While BHS workers are partially protected by the U.K.’s Pension Protection Fund, financed through a levy on employers, they stand to lose part of their retirement income unless the U.K. claws back pension funding from the former owner of the store chain, Philip Green.

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