Despite press speculation to the contrary the Government amendments to the "moral hazard" clauses of the Pension Bill have turned out not to be a "u-turn" but more a minor tightening of the controls on the proposed new Regulator.

As previously announced companies involved in transactions or restructurings will be able to get prior approval from the Regulator that the proposed transaction will not result in a contribution notice or financial support direction being placed upon them. Doubts have to remain about the speed of this process and whether this will fit in with transaction timetables. In addition, it is unlikely that the Regulator will often exempt purchasing firms from the liability of the acquired company's pension schemes.

Other changes are relatively minor such as requiring the Regulator to satisfy a "reasonableness" test in issuing a financial support notice and allowing the Regulator to take into account the purpose of any actions in determining whether to invoke the moral hazard clauses. The Regulator can also make a direction to cover only part of the liabilities.

Crucially for private equity firms, whilst insolvency practioners and individuals may be exempt, limited liability partnerships will still be covered by the moral hazard provisions.

Commenting on the proposed amendments, Richard Jones FIA, a principal of Punter Southall, said "The revisions proposed by the Government are not going to satisfy the private equity industry. The corporate veil will still be pierced by pension liabilities and limited liability partnerships could still end up picking up the tab for the pension liabilities of their failed investments."

Paul Geeson FIA, a principal of Punter Southall, noted that "Whilst insolvency practioners will be relieved there is little in the much heralded 'u-turn' for anyone else, the Government has failed to be swayed by the extensive lobbying over the concern that the moral hazard clauses will damage UK plc."

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