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Dividend pension shock

Companies which pay dividends face having to contribute to the firm’s pension scheme under new rules set out by the Pensions Regulator last week.

When the Pensions Act 2008 was passed, Parliament was assured firms or individuals that pay dividends would not be issued with contribution notices but information published by TPR last week reopens this possibility, according to Watson Wyatt.

Head of defined-benefit pension consulting John Ball says: “With most schemes running substantial deficits, only the sponsor stands between scheme members and cuts in benefits, so it is understandable the regulator does not want to leave any loopholes. That may be why it has watered down earlier assurances that authorising a dividend payment will not put dir- ectors on the hook for the company’s pension debts.

“The danger is that creating these grey areas could leave companies feeling hamstrung when they need to take decisions, which could affect the pension scheme.”

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