The company’s statement comes following the publication of UK political party manifestos. The Conservative Party’s manifesto promises new powers for the Pensions Regulator, including authority to approve or block mergers, takeovers or major business commitments that threaten the security of a company’s pension scheme. In its manifesto, the Labour Party’s stated it would change company takeover rules to ensure plans are in place to protect workers and pensioners when a company is sold.
Both manifestos pledge to revise the way businesses manage corporate transactions so that the interests of pension scheme members and employees are better protected. These differing commitments are the result of a DWP select committee review into the role played by the Pensions Regulator in the run up to BHS’s insolvency and its effect on the BHS pension scheme, and the Green Paper consultation that followed.
In evidence provided to the select committee and in its response to the Green Paper, Mercer identified the importance of good corporate governance that takes all company stakeholders into account, rather than solely focussing on short term shareholder gain. Mercer went on to warn against giving more power to the Pensions Regulator, which could result in more harm than good.
Dr Deborah Cooper, Partner and Mercer’s UK Risk and Professionalism Leader, said “Defined benefit pension schemes are best served by successful, well run, employers. Some headline making cases have brought companies’ responsibilities to their schemes into the spotlight, which is not a bad thing, but it seems possible that the future government’s response to demands for something to be done could have negative consequences. Our response to the consultation made clear that, while we agree the current pension’s regulatory regime could be implemented better, we don’t see a case for extending it.”
She continued, “The Regulator has a very narrow set of objectives, compared to the range of stakeholders with an interest the future success of UK companies. It is clearly important that pension scheme members’ interests are not ignored when corporate restructuring takes place, but there are other groups – including other company creditors and employees – whose interests also need to be taken into account and the Regulator has no remit to consider this.
“It also has limited resources, so its involvement could unnecessarily impede legitimate changes to businesses. Extending the Regulator’s role seems likely to duplicate the responsibilities of other regulators whose remit already extends to corporate activity and governance. We think the Regulator could make better use of its existing powers to ensure that trustees of pension schemes, its natural regulated community, can work well with employers so that they are aware of any relevant corporate risks and able to respond to them.”
In particular, Mercer:
Thinks the Regulator needs a different way of working with the statutory funding regime, with better selection of cases, swifter decision-making and fast closure, rather than additional powers.
Does not support the Regulator having a mandatory role in relation to business restructuring. Instead, the Regulator could use its information gathering powers more effectively to investigate cases where there are likely to be concerns.
Says the Regulator could – as it now says it intends to – make more use of its powers to publish information about the cases it’s looked at. The associated publicity would help discourage inappropriate actions and, in this regard, the BHS case is likely to have lasting effects.
Dr Cooper added “There’s a danger here of legislation being created that responds to the perceived activities of pantomime villains, resulting in unnecessary and unproductive interference in the normal business activity of ordinary companies. This will be counterproductive, since it would become harder for those businesses to raise investment, thus jeopardising members’ benefit security, and the security of the company’s employees and other stakeholders, rather than improving it.”
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