Sweeping new powers being demanded by The Pensions Regulator could see companies in difficulty abandoned to their fate, according to the Institute for Turnaround. In many cases the added financial risk could make the difference between Turnaround experts taking a business on and saving jobs or deciding the odds were too heavily stacked against success.
Research amongst the Institute for Turnaround individual and corporate members highlights the concern that turnaround professionals and others have about the effect of amendment 130EW to the Pensions Bill, which they feel will destabilise a substantial section of British industry.
Amendment 130EW would give the government the right to amend without limit the key powers of the pensions regulator, and the Department of Work and Pensions has indicated that these powers will be used initially to strike out the exemption for acts that do not have the avoidance of pensions liability as a purpose, to widen the net as to where additional funds for pension schemes may be sought, and to enable the law to be changed retrospectively.
In an Open Letter to Trade Minister Lord (Digby) Jones, Lord Lucas, an expert on pensions issues says,
“Clearance from the Pensions Regulator could not be relied upon, as rules could be changed retrospectively; purchasers who had paid fair value for parts of the business, or even for companies in the same group, could find themselves retrospectively liable for contributions to the pension fund; directors could be made personally liable for decisions which were taken in good faith (for instance, to pay a dividend) because the company hit financial difficulties in subsequent years - the dividend payment would then be seen as having reduced the assets available for the pension fund.”
Christine Elliott, Chief Executive and Director of the Institute for Turnaround said,
“We don't think it is tenable for bargains to be made then rewound under different rules, which is where the current changes are leading us. Companies with a scheme will become moribund, unable to raise new capital or reorganise themselves until liquidation or Divine providence lift the pension burden.”
“We already know of cases where otherwise viable businesses are bleeding to death because cash is being sucked out to finance a deficit in an unrelated company. Turnaround executives and company directors strive to rehabilitate businesses, public and private sector but the additional powers being demanded through the back door of secondary legislation are unnecessary and will be counter-productive to turnaround efforts.”
“In the current economic climate, these measures increase the probability of struggling companies with defined benefit schemes moving straight from Accident & Emergency to the mortuary. The lessons learned from mishandled taxation changes should put the brakes on these proposals right now,” she said.
Christine Elliott, Chief Executive and Director
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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.
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negotiating and executing business turnaround that shapes the real
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