UK - Government changes to controversial moral hazard clauses in the Pensions Bill will "not go far enough" to allay industry concerns, lawyers warn.
Critics claimed the original clauses - introduced to prevent firms dumping their liabilities on the Pension Protection Fund - would scupper corporate transactions and company turnarounds, and meant that the family members of company directors could be held liable for a scheme deficit.
The changes announced by the department for work and pensions, which will be debated as amendments to the Bill in the Lords on November 1, will clarify who is “associated” with the employer for the purpose of the Financial Support Directions.
They will also introduce a clearance procedure and a “backstop” period for the time the regulator can assess acts or failures before any decision to issue a contribution notice.
However, lawyers say the clauses will still have a detrimental effect on business, and will leave individual company directors liable for scheme shortfalls.
Pinsents head of pensions Chris Mullen (pictured) said: “The risk that any company outside the corporate group could be attached with a pensions deficit, still could act as a deterrent to banks and investors.”
He added: “I don’t know how, without a large increase in its budget, the regulator will be able to implement an effective clearance for every deal that is done involving a scheme. It will take years before cases get through.”
Allen & Overy partner Dana Burstow agreed that the proposed changes did not go far enough and the clauses would ìstill be a disincentive to investment in the UK”.
Addleshaw Goddard partner Jade Murray said: “The failure to exclude turnaround professionals from the scope of the clauses may have a significant adverse effect on the rescue of companies in distress.”
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