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FINANCIAL SERVICES & PENSIONS: The final act.
(From The Lawyer)
Pension fund trustees are looking to the provisions of the Pensions Act 2004 to protect the interests of members in the case of bankruptcy. By Andrew Visintin and Grant Jones
Much coverage has been given to the state of UK pensions, with estimates of a pension fund deficit of around GBP130bn in relation to the FTSE100 companies alone. The Confederation of British Industry (CBI) recently recognised that the Pension Protection Fund (PPF) would cost UK industry more than GBP500m in contributions. The CBI has further warned that, as a result of the legislative changes, which require companies to put their defined benefit pension scheme deficit on to the balance sheets, up to one in five UK companies could technically be insolvent.
Pension fund trustee v BBB
Pension fund trustees have been asked in such circumstances to act as if they were a bank when looking to protect the interests of beneficiaries. On 21 March 2006, a pension fund trustee so acted in petitioning for the administration of Berkeley Berry Birch (BBB), a quoted top five independent financial adviser. BBB was in the process of selling off its subsidiary companies. The pension fund trustee felt that the appointment of an insolvency practitioner from a firm other than that proposed by the company would be in the best interests of the pension fund beneficiaries. It is believed that this is the first time a pension fund trustee has issued a creditors' petition for administration.
The case is significant in that it is emblematic of a shift in the attitude of pension fund trustees. In many cases, the pension fund trustee will be a major creditor, and as such will exercise their power in the same way as banks and bondholders have in the past. The trustees will be conscious that the Pensions Act 2004 provides for defined benefit (DB) member compensation in the event of insolvency. Delay in finalising an insolvency process delays compensation.
The rules
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