January 16
A Frank rebuke for the Rt Hon Mr Field

The chair of the Work and Pensions Committee, the Rt Hon Frank Field has renewed his calls for pension reform and criticised the Government for further delaying its white paper on defined benefit security and sustainability.  This comes after pensions and financial inclusion minister, Guy Opperman, said in parliament last Thursday that "The white paper will be delivered at some stage this spring".  He went on to quip "Spring is an elastic term in the House of Commons… but it will certainly be delivered before the summer period".  With yesterday’s collapse of Carillion, it is not surprising that Mr Field is becoming increasingly agitated by the delay.  However, striking the right balance between protecting people’s pensions and minimising the obstacles to economic growth is not easy.  Furthermore, Mr Field’s criticisms are not always fair.

Indeed, Mr Field himself has received some heavy criticism in a letter from Wedlake Bell, acting on behalf of the former chair and CEO of the collapsed Palmer & Harvey group (P&H), Christopher Etherington.  Mr Field had previously linked the insolvency of P&H and the plight of its defined benefit pension scheme members to the actions of Mr Etherington and the dividends paid by P&H over a ten year period.  He seems to have done this without any real knowledge about the detail of the situation, angrily shooting from the hip and perhaps missing the target altogether on this occasion.  Wedlake Bell’s letter is an interesting read.  That and other correspondence relating to the P&H case can be found here.

It is perhaps no surprise that Mr Field quickly latched onto the fact that significant dividends appeared to have been paid in the P&H case.  Dividends being paid was certainly an issue for BHS, where Mr Field co-chaired the inquiry into the circumstances surrounding the pension scheme transferring into the Pension Protection Fund.  However, the payment of dividends is a normal business activity and this is recognised in the Pensions Regulator’s existing guidance requiring Trustees to consider their sponsor’s dividend policy only in the situation where the support provided by the sponsor is already constrained, the timing is unusual or the dividends are exceptionally large.  This reflects the Pensions Regulator’s two conflicting objectives of protecting the benefits of occupational pension scheme members and minimising any adverse impact on sustainable growth of employers.

Given the limited budget that the Pensions Regulator currently has, it is unlikely that we will see any significant increase in the incidence of it exercising its moral hazard powers and undertaking widespread reviews of historic dividends paid in cases where there is not a significantly underfunded pension scheme.  That probably means whilst we are waiting for the white paper we will see a lot more cases where Mr Field vents his frustration at the Pensions Regulator and those connected to the sponsors of pension schemes which end up in the Pension Protection Fund.

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