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Shareholder dividends cannot be made over pension contributions, says Pensions Regulator

Companies with struggling pension schemes will not be allowed to cut contributions while they are still paying dividends to shareholders, according to the Pensions Regulator.

The regulator has today issued a statement to employers who sponsor final salary pension schemes regarding the impact of current economic conditions.

It says trustees should be in a position to understand what is reasonably affordable for their sponsor, but all unsecured creditors must be treated equitably and the pension scheme not disadvantaged.

The statement goes on to say that employers need to be reassured that the current scheme funding regime is flexible enough to cope with the economic downturn.

It adds that where a sponsor company is under pressure there is potential to renegotiate previously agreed plans to repair pension deficits.

Pensions Regulator chairman David Norgrove says: “Trustees of pension schemes in deficit are unsecured creditors of their sponsoring employer. We are sensitive to the pressures many of these employers face in current economic conditions with falling asset prices and increasing deficits. There is no reason why a pension scheme deficit should push an otherwise viable employer into insolvency. But the pension scheme recovery plan should not suffer, for example, in order to enable companies to continue paying dividends to shareholders.

“Any employer who believes that an existing recovery plan is at serious risk of jeopardising the company’s future health or solvency should discuss this with their pension scheme trustees, and we would encourage schemes and sponsors to talk to us if they have concerns.”


John Simmonds

Launching a new business is tricky and launching in the teeth of a recession makes the process more fraught but Bluefin Advisory Services CEO John Simmonds is upbeat about the economic headwind.


Guide: day-to-day tasks ​— can your system manage?

This guide from Johnson Fleming will take you through the required communication and also give ideas for additional actions that will ensure your auto-enrolment project is a success. As well as highlighting what is required from a system to ensure it is up to the tasks, an overview of the following is also provided: data validation; data categorisation; employee communication; opt-in process; opt-out process; produce contribution schedule; contribution reconciliation process; upload of member data to pension provider; upload contribution to pension provider; manage salary sacrifice process; enrolment process; re-enrolment process; and management of increased employee queries.


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