This is intended to prevent situations like the one seen with BHS earlier this year, which has reportedly been asked for a £350m contribution to it’s pension deficit, which under the new proposals, would equate to a charge of up to £1bn.
It is expected that in reality these punitive fines would never need to be levied, as they would act as such a strong deterrent to avoiding pension obligations, with the committee chair Frank Field MP also calling for TPR to reduce the length of recovery plans.
He said: “It is difficult to imagine TPR would still be having to negotiate with Sir Philip Green if he had been facing a bill of £1bn, rather than £350m.
“He would have sorted the pension scheme long ago. The measures we set out in this report are intended to reduce the chance of another scheme going down the BHS route.
“We hope and expect that we will never again see a company like BHS be able to come up with a 23 year recovery plan for its pension fund, and certainly not that it would take the regulator two years to really begin to do anything about it.”
BHS went into administration earlier this year after it was sold to Dominic Chappell’s Retail Acquisitions Ltd for just one pound, resulting in the loss of 11,000 jobs and an estimated pension deficit of £571m, affecting 20,000 current and future pensioners.
This is just one example of the potential problems facing UK pension funds, with 74% of schemes in deficit in November this year, worth a combined value of £195bn according to the report.
The committee propose that the TPR should be able to:
• Make the timetable for pension valuations flexible—shorter or longer—to reflect the riskiness of schemes
• Ensure submissions of valuations and recovery plans are completed within nine months
• Give clearance to all major corporate takeovers
• View recovery plans that are more than 10 years as exceptional
• Intervene early if it has concerns over a scheme.
“It is inconceivable that Sir Philip Green's deal to dispose of BHS and its giant pension deficit for £1 to a dismally unqualified man, with no plan for the pension schemes and no means of financing one, would have evaded or passed any mandatory clearance scheme,” Field continued.
“To prevent another BHS we need to have the means to nip inevitable disasters like this one in the bud.
“We hope the government will consult on the package of measures we propose, which would go a long way, without resorting to any new reams of red tape, towards doing just that.”
“It will sadly be of no comfort to the 20,000 BHS pensioners facing cuts to their promised pensions, but had just some of these measures been in place they might never have ended up in that situation."