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Directors’ protection on pension regulation

James Phillipps

Directors and insolvency practitioners will be shielded from pension regulator contribution notices under amendments to the Pensions Bill on moral hazard provisions.

Following consultation, the Government has agreed to the measure to prevent disincentivising people from becoming company directors. It also wants to avoid obstructing insolvency practitioners from trying to keep companies afloat where possible. Venture capitalists have not been given the same protection to ward off vulture firms.

In order to prevent unquantifiable liabilities, the new pension regulator will only be able to look at acts or omissions occurring no more than six years previously when deciding whether to issue a contribution notice.

Companies will also have some scope to reduce pension contributions to their DB schemes if they can prove that it was done to prevent having to make large-scale redundancies.

The changes are to protect the pension protection fund from companies dumping their liabilities on to the compen-sation scheme and prevent abuses of the system, which comes into effect in April.

Pinsents pension associate Simon Tyler says limiting company’s potential DB liabilities to six years will help ensure that buyers can be found for struggling businesses.

Tyler says: “Its success depends on whether the new regulator will have sufficient resources and expertise to ensure that procedure lives up to expectations.”

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