Mayer Brown comments on UK Pensions Regulator alarm for private equity
4 September 2008
4 September 2008 - Although the full details have not been made public, it has emerged that following negotiations with the Pensions Regulator and Duke Street, Duke Street has made a payment of a further £8m into the Focus DIY Pension Fund.
This has raised concern amongst private equity houses, particularly as Duke Street disposed of the company supporting the pension scheme last year. The case brings into focus the "moral hazard" powers the Regulator currently has to require financial support to defined benefit schemes, and the new powers the Regulator is to be granted following the announcements of earlier this year. One of these moral hazard powers, the financial support direction, allows the Regulator to look back at entities connected or associated with the scheme sponsor for up to a year.
Martin Scott, a partner in the pensions group at Mayer Brown said: “The action by the Regulator may be a sign of things to come, although up until now the Regulator has seldom used its powers. The risk of Regulator intervention is perhaps greater when new powers are granted to the Regulator allowing it to consider the effect of a transaction on the pension scheme rather than the current test of focusing on the intent of the parties.”
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