How do you perceive the Pensions Regulator? Anyone who saw it as a toothless outfit will eat their words when they learn that it has used its toughest weapon – a contributions notice – against Michel Van De Wiele, a Belgium based manufacturing company.
The company was accused of seeking to use an insolvency scheme to avoid or reduce its pension liabilities, when it put its UK subsidiary “Bonas” into liquidation in 2006.
The Pensions Regulator has now served the Belgian parent company with the notice that requires it to make up some of the deficit in its final salary scheme.
At first glance you may think that the regulator has dragged its feet on this case, given that the corporate restructuring took place in 2006. However, until 2008, the regulator would have had to face the insurmountable hurdle of providing evidence that the corporate restructuring was for the purpose of avoiding the pension liabilities. Since 2008, a change in the law means that the Pension Regulator needed only to prove that the reorganisation caused a significant worsening in the pension scheme’s projected deficit. No evidence of intention to avoid liabilities is necessary.
Commenting on the case, a spokesman from the Pensions Regulator revealed many cases that may have resulted in a contributions notice have crossed his desk. However, the majority are settled with voluntary contributions into pension schemes because companies want to avoid publicising their predicament. The spokesman reckoned that hundreds of millions of pounds had been secured on behalf of British final salary schemes in this way.
It’s been reported that the Michel Van De Wiele may seek to contest this ruling. No information is available about how long any challenge may take. In any event, the case serves as a warning to other schemes that the Pensions Regulator is awake, and prepared to hand out onerous sanctions.
There had apparently been some debate among pension scheme trustees about whether or not the Pensions Regulator would force payments to be made during the recession. This case proves that a global economic crisis is no defence to shirking your pension responsibilities.
