Ian Brown speaking out at Edinburgh on the need for growth.

At the PLSA Conference , I asked a question of key trustees and investment decisions who were discussing whether risk should be taken into the investment strategies of their pension funds (DB and DC).

The question arose in an article that dealt with the same issue and this time it was Ian Brown of UK National Wealth Fund who was complaining about the lack of enterprise amongst  pension trustees and their advisers. He wasn’t getting the investment into his bank and he wasn’t doing the good he planned to do.

The FT article did not raise the Section 58 prohibitions on Trustees but  I had asked about  this in open session in Edinburgh’s PLSA event.

Thankfully I have readers who know the restrictions placed upon them. Here is Jnamdoc (rumoured to be a Chair of a billion plus pension fund)

jnamdoc says:

March 16, 2025 at 7.32 (Edit)

This is a passionate response to Ian Brown’s calls, here is a rather more measured response, a little dry for some but written with ironic humour I suppose!

He is referring to John Hamilton who was eloquent on this subject at Edinburgh. I have kept extracts from the Pensions Act out of italics.

Byron McKeeby

Section 58 of the Pensions Act 2004 says

[TPR’s] right to apply under section 423 of Insolvency Act 1986

(1) In this section “section 423” means section 423 of the Insolvency Act 1986 (transactions defrauding creditors).

(2)The Regulator may apply for an order under section 423 in relation to a debtor if—

(a)the debtor is the employer in relation to an occupational pension scheme, and

(b)condition A or condition B is met in relation to the scheme.

(3) Condition A is that a determination made, or actuarial valuation obtained, in respect of the scheme by the Board of the Pension Protection Fund under section 143(2) indicates that the value of the assets of the scheme at the relevant time, as defined by section 143, was less than the amount of the protected liabilities, as defined by section 131, at that time.

(4) Condition B is that an actuarial valuation, as defined by section 224(2), obtained by the trustees or managers of the scheme indicates that the statutory funding objective in section 222 is not met.

…

TPR’s protection of the PPF is not new, although arguably this statutory objective of TPR’s could be relaxed now the PPF seems to enjoy a very healthy funding surplus and is even scaling back its annual levy on surviving DB schemes.

I think John Hamilton, however, is really drawing attention to Section 58B of the 2004 Act, added by the Pension Schemes Act 2021, as follows:

Offence of conduct risking accrued scheme benefits

(1) This section applies in relation to an occupational pension scheme other than—

(a) a money purchase scheme, or

(b) a prescribed scheme or a scheme of a prescribed description [ie a public sector scheme or specific pension schemes, such as the Armed Forces Pension Scheme, British Transport Police Force Superannuation Fund, and Firefighters’ Pension Scheme]

(2) A person commits an offence only if—

(a) the person does an act or engages in a course of conduct that detrimentally affects in a material way the likelihood of accrued scheme benefits being received (whether the benefits are to be received as benefits under the scheme or otherwise),

(b) the person knew or ought to have known that the act or course of conduct would have that effect, and

(c) the person did not have a reasonable excuse for doing the act or engaging in the course of conduct.

(3) A reference in this section to an act or a course of conduct includes a failure to act.

(4) A reference in this section to accrued scheme benefits being received is a reference to benefits the rights to which have accrued by the relevant time being received by, or in respect of, the persons who were members of the scheme before that time

…

Of course, TPR’s Criminal Offences Policy published in 2021 at

 https://www.thepensionsregulator.gov.uk/en/document-library/regulatory-and-enforcement-policies/criminal-offences-policy

said that “the vast majority of people do not need to be concerned – we don’t intend to prosecute behaviour which we consider to be ordinary commercial activity”.

That is the kind of get out of jail card that regulators play when protecting their backsides. It is not much use, please read on.

I will end by making a comment made to me by John Hamilton last week (my words). A trustee will have this read to them by their lawyers as a warning and he or she will know that the sponsors will be given advice by their lawyers where the decision is significant to future funding.

In short, trustees are prevented from taking long-term decisions because of the “J-curve” impact of valuations of some investments. While in the initial dip (like the start of a letter J) a decision may look bad, it may end up bad too. But to invest in ventures that have the potential to succeed is not a criminal activity if it is a risk that the scheme can take and survive. I agree with McKeeby and Hamilton and I suspect many others who are still afraid to raise their heads (but will do if the Minister recognises and acts upon the legislation and regulation that is preventing his and his Government’s target for growth from pensions.