Pensions as poison pills? I’m not so sure!


It’s a tough time of year for pension journalists who typically resort to year-end round ups to fill their article quotas. Not so, the admirable Jo Cumbo who runs a story today claiming that The Pensions Regulator is putting the mockers on corporate activity through the threat of new powers that could put the deal-makers in jail.

I am no fan of extending the Pension Regulator’s powers, they are currently exercising their powers in ways I find distasteful (the threat of the DB code, the ponderous assessment of Pension Superfund) while showing how powerless they are in getting occupational pensions to get dashboard ready. If you want a pile of rotten tomatoes to throw at tPR, Jo, I live just round the corner from your office and have plenty from Christmas lunch!

They would say that….

But reading the article (go on- buy yourself a new year FT subscription), I am struck by the source of this story. Step forward

  1. John Harvey of Aon who is “aware of one good-sized deal — involving a DB scheme — that collapsed….The negotiations were advanced. The pension worry played a large role in the decision to withdraw from the deal”
  2. Stephen Postill, senior director with Willis Towers Watson   “There’s certainly an air of nervousness about deals, it’s early days but I expect the new rules will make it harder for a business to sell if they have a substantial pension scheme,I would say these powers are a more of a deterrent for private equity deals.”
  3. Charles Cowling , chief actuary at Mercer  “It is slowing down the process because employers have to take much more care to ensure that [pension scheme] trustees are informed of any corporate activity that might have implications for the strength of the covenant”
  4. Robert Wallace of XPS  “Even though the risk of a jail term may be small, it is not something that some buyers are willing to take on in a deal.”

I am sorry Jo,  but these witnesses are hardly impartial – they are all getting paid for making deals happen and all work for firms that benefit both from advising the protagonists but also from work they do with the trustees and employers as their BAU.

John Harvey has been found on social media campaigning against the draft regulations

Concerned about how broad the new criminal offences in the Pensions Schemes Act are drafted? I know I am…

Help us lobby for a pragmatic implementation and respond to our 5 minute industry-wide survey.

Stephen Postill , Robert Wallace and Charles Cowling are like John, power-brokers for whom TPR are definitely on the other side!

So let me say this!

Pensions as poison pills? I’m not so sure!

DB pensions have been worrying corporate financiers for 20 years as this article in the Guardian reports.

But UK pension schemes have not been in as good a shape at any time this millenium. The PPF now reckon the average DB pension scheme is over-funded to meet its liabilities.

There are a few problem ones of course. But most are well and prudently funded and de-risked. Those purchasing companies with a DB scheme may be using this extension of project fear as a negotiating ploy to get the price down.

What we really need is a better way to relieve U.K. business of legacy DB liabilities. That does not necessarily mean more de-risking , it might include the transfer of assets and liabilities to the kind of superfunds that want to manage liabilities out over time, investing in productive capital like- private equity!

The Pensions Regulator does get a chance to comment in the FT’s article

“We don’t intend to prosecute behaviour which we consider to be ordinary commercial activity. However, if someone is proposing to do something that would amount to a more serious example of intentional or reckless conduct putting members’ savings at risk, we will not hesitate to use the powers we have to protect members…”

Bearing in mind the new found urgency from the Government to promote the use of productive capital to back pension promises, Charles, John, Robert and Stephen should have little to fear from DB as a “poison pill”, there are other forms of poison to worry about.




About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions and tagged , . Bookmark the permalink.

Leave a Reply