The Pension Regulator should be given new powers to block company deals so that employees and pensioners are better protected in the wake of events such as the collapse of BHS, the former chair of the Pension Protection Fund has said.
Lady Judge, who stepped down last month, said the regulator was not equipped to deal with situations such as that at BHS, sold by Sir Philip Green to Dominic Chappell for £1 last year and now left with an estimated £571m pensions black hole.
“The regulator should have the right to approve or disapprove any corporate transaction that might disadvantage pensioners,” the Financial Times quoted Judge as saying. “If it had had the power, we would not be in this situation.”
However, the pensions minister, Ros Altmann, suggested such an approach would be too strong. “I would be nervous about saying a transaction could not take place. But we must be clearer [to companies] about the consequences of failure to get clearance for a deal.
“If we need to give the regulator more powers we will, but it is not clear yet. Any changes would need to be done with careful consideration and not kneejerk reaction.”
Lady Altmann said the regulator needed to be given the chance to carry out its report on the BHS pension scheme.
But Judge said pensioners needed more protection. “We need to take care of [pensioners] as a country and not let unscrupulous big corporates put them in a position where they won’t be able to have a reasonable future,” she said.
In a separate interview, Altmann said Britain’s vote to leave the European Union would place greater strain on companies with defined benefit pension schemes, driving deficits higher if the economy weakens and interest rates stay lower for longer.
She said that under such circumstances, businesses should not be forced into putting too much money into schemes. “I do think it’s important that when we’re making plans for the future the government recognises that employers are having, in some cases, a really difficult time supporting the pension promises they have made.
“Part of the reason for that is the trend in interest rates. What we don’t want to do is offset some of the stimulus by forcing companies to put too much money into their pensions in the near term if they can’t afford it, so there’s that delicate balancing act.”
Mark Carney, the governor of the Bank of England, has signalled that Threadneedle Street is ready to pump more money into the economy following the shock Brexit vote. Immediately after the result was announced Carney said the Bank was prepared to provide UK banks with an additional £250bn of liquidity.
The governor has also hinted that interest rates could be cut from their record low of 0.5%. Another option available to the Bank would be more quantitative easing, where new money is created to buy assets such as government bonds.
QE was first launched in March 2009, as the Bank attempted to limit the impact of the financial crisis.
