If anyone ever doubted that the new Pensions Regulator is serious about protecting members in defined-benefit schemes, those doubts must have been dispelled by the Marconi case.Ericsson is to pay 1.2bn for 75 per cent of Marconi’s assets and the rump of the remaining Marconi company is to be renamed Telent. It is through examination of the position of Marconi shareholders that we see the radical nature of the Pensions Regulator’s actions. If this deal had happened a couple of years ago, it is quite possible that Marconi shareholders would have got the whole 1.2bn as I understand the Marconi pension scheme was and is funded in excess of 100 per cent of the old minimum funding requirement. As it stands, the Marconi shareholders are due to get about 577m, a little less than half of what Ericsson is paying. Of the remainder, 185m is going straight in to the Marconi pension scheme and 490m is to be set aside in an “escrow” account, to be paid into the Marconi pension scheme as and when needed. If the liabilities of the Marconi pension scheme can be settled without using the whole 490m, the implication is that the unused balance of the escrow account will be released to Telent shareholders. Any company with a defined-benefit pension scheme should pay very close attention to the Marconi/ Ericsson deal because it may set a precedent for future take-over activity. Because Telent is a much weakened company, the Pensions Regulator has effectively gone beyond financial reporting standard FRS17 as a yardstick and has moved quite a long way towards the cost of buying out with a life office. I applaud it for doing so although I feel sympathy for Marconi shareholders, some of which will be other pension funds. By using the concept of escrow, the Pensions Regulator has recognised that the cost of a defined-benefit to a pension scheme is only ever completely known when the beneficiary dies or the liability has been transferred to another pension scheme or life office. Of course, the Pensions Regulator is not simply interested in takeovers involving defined-benefit schemes. It has a fundamental interest in the funding of all private sector defined-benefit schemes. We are about to start the new scheme-specific funding regime in place of the old MFR. This will incorporate from the Euro-pean Pensions Directive the concept of “technical prov- isions”, which is the amount that the scheme needs to hold today to meet its liabilities as they fall to be paid. This sounds like solvency but the UK is interpreting it differently. The UK is saying that it is up to the trustees, employer and scheme actuary in each case to decide what is an appropriate basis for technical provisions. It remains to be seen if the UK interpretation will be challenged in the European Court and, if so, if it will be upheld but in the meantime, it is the Pensions Regulator’s task to ensure that scheme-specific bases are not too weak. Weak bases would jeopardise the security of members’ pensions and lead to extra claims on the Pension Protection Fund. The Pensions Regulator is likely to look closely at any scheme funded below the range of PPF benefits and FRS17 for a typical scheme and it will examine any recovery plan which is going to take more than 10 years to make good any deficiency on the scheme-specific basis. If the real message of the Marconi case is that the Pensions Regulator wants pension schemes to aim, over time, for something significantly stronger than FRS17, that could be very painful for defined-benefit employers. Many must be praying that the investment markets will solve the problem for them. The Pension Regulator’s stance may sound stringent but, from the member’s viewpoint, they only get their full benefit if the scheme becomes solvent before the employer becomes insolvent.