UK - The Pensions Regulator has dismissed claims it will be "overwhelmed" with clearance demands stemming from moral hazard clauses in the Pensions Bill.
Chief executive designate Tony Hobman told delegates that while the TPR was still assessing the amount of resources it would need to be able to deal with clearance inquiries, he was confident it would be up to the job.
Hobman explained: “There has to be a period of preparation where we gear up and equip ourselves to meet this challenge. However, while this is a challenge, it is not impossible and is definitely a challenge we can meet.”
Despite the reassurances, lawyers believe the moral hazard clauses – which are designed to prevent companies dumping pension liabilities on the PPF – will either deter corporate transactions in the UK or overwhelm TPR with clearance requests.
Pinsents national head of pensions Chris Mullen said either no-one would apply for clearance so as not to alert the authorities, making the clearance process redundant, or companies would report everything on a “better safe than sorry” basis.
Mullen warned: “If this happens, I would expect the regulator’s office to be swamped, unless very significant extra resources are brought in to help them cope.”
He added that either way, mergers involving firms with defined benefit schemes would become much more difficult.
“The most likely outcome is that M&A deals involving companies that have connections to final salary plans will become extremely difficult to do, both in practical terms and because the price of such companies could fall dramatically o make allowance for their potential liabilities.”
OPRA is due to consult with trustees and advisers on its draft of TPR’s first code of practice in early December, following months of consultation.
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