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Regulator issues warning over employer related investments

The Pensions Regulator has warned trustees, companies and advisers to ensure schemes do not fall foul of rules limiting employer related investments.

Under laws governing the investments, which include shares or securities issued by the sponsor employer and loans to an employer, no more than 5 per cent of pension fund assets can be invested in ERI.

In a statement, the regulator outlines the potential risks involved in the use of “innovative funding mechanisms” being employed to fund defined benefit schemes. It says ERI poses potential problems in both DB and DC schemes.

Executive director of business delivery June Mulroy says: “The laws governing employer related investments are a key concern for schemes – for both complex DB funding structures and collective investments.

“Trustees are responsible for ensuring that their scheme does not fall foul of the law on ERI, and we are keen to help them understand the issues. Where we see potential breaches, we will consider each case on its own merits and take a proportionate approach.”

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