Sweeping new powers demanded by The Pensions Regulator may force the Institute for Turnaround (IFT) to advise its members not to accept turnaround assignments in companies with a defined benefits pension scheme.
The Institute’s response to a Department of Work and Pensions (DWP) consultation* says that the proposed amendments materially diminish the prospects for solvent company turnaround where a defined benefit pension scheme exists. IFT accept that this may be inadvertent. However, they say, some of the proposals as drafted appear imprudent or inconsistent; some may be illegal or arguably immoral on human rights grounds. “The swingeing powers demanded are akin to needing 42 days’ detention as of right and the practical effects are as ill-defined as for the 10p tax band,” the Institute says.
The Institute recognises it is a ‘given’ that disreputable persons will try to shed legitimate pensions liabilities from employers, a practice it describes as ‘abhorrent.’ Equally, the Pension Protection Fund is a finite resource and it is not in the market’s interest for the Fund to be overwhelmed by schemes propelled in to it. IFT’s concern is that the amendments as proposed increase the likelihood of both eventualities. The Institute’s members have responsibilities in Turnaround to all stakeholders.
Among the concerns highlighted in its response to the consultation are the lack of publicly available evidence for the changes; implications for public sector pension schemes in deficit; lack of clarity, certainty and closure in applying pensions clearance guidance; duplication of existing legal powers; the additional time, costs and delays involved in getting clearance; potential human rights breaches when employees in companies within a group may lose their livelihood due to pension deficits in associated companies; the retrospective nature of the legislation; removing the need for ‘intent’ to be proven, making ‘good faith’ irrelevant.
Christine Elliott, Chief Executive, said,
“We have started sensible discussions with DWP. However, assurances in private meetings do not negate the huge additional risk exposure facing turnaround executives attempting to save jobs and businesses.
“Regulatory ‘creep’ has been supplanted by regulatory gallop, with substantive change being increasingly introduced through secondary channels. We therefore call for an independent Regulatory Impact Assessment and for Parliament to scrutinise the legislation.”
* Response to the Consultation of April 2008 on what are described by the Department for Work and Pensions (DWP) as ‘Amendments to the anti-avoidance measures in the Pensions Act 2004’
The Institute for Turnaround (IFT) is Europe’s leading professional body for the whole Turnaround Community. IFT was founded in 2000 as The Society of Turnaround Professionals. We represent a unique audience responsible for funding, structuring,negotiating and executing business turnaround that shapes the real economy. We have a membership of rigorously accredited turnaround executives and advisers, with corporate partners representing the best in law, accountancy, corporate banking and finance, private equity and other experts involved in the field.
Christine Elliott, Chief Executive and Director
Email – firstname.lastname@example.org
Telephone – 020 7324 6244
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