Managing pensions risk in corporate groups
Recent high profile insolvencies have demonstrated that corporate groups can face intense and sometimes high public scrutiny if they make decisions that could detrimentally impact a defined benefit pension scheme operated within the group. That scrutiny may take place a considerable time after the corporate activity in question, when the circumstances of the group have radically changed, and will inevitably be conducted with the benefit of hindsight. For example, companies may face investigations from the Pensions Regulator (the Regulator) where funds have been returned to shareholders (eg through dividends or capital reductions) many years prior to its financial difficulties.
This briefing considers what corporates and their directors can do to ensure that their corporate decision-making properly considers and addresses the impact of corporate activity on group pension schemes (and to ensure that such steps are properly documented) with the aim of both reducing the risk of any future investigation being instigated and putting the group and its directors in the best position possible to defend any such action.