Pension Protection Fund (Moratorium and Arrangements and Reconstructions for Companies in Financial Difficulty) Regulations 2020

Baroness Altmann Excerpts

Monday 14th September 2020 Grand Committee

[Baroness Altmann (Con)]

My Lords, I thank my noble friend the Minister for laying these amendments and for the excellent way in which she introduced them. I also support the amendments and believe that many of the points made by the noble Baroness, Lady Drake, are particularly relevant. It is clearly important that the Pension Protection Fund has some recognition—or as much as possible, if you like—in the new environment that has created the moratorium and various super-priorities. It is important that the Pension Protection Fund retains creditor rights where it can to avoid gaming of the fund, which otherwise could be overwhelmed with extra liabilities that are picked up by other pension schemes.

I agree with my noble friend that it is important to ensure that these regulations are able to act in the interests of the Pension Protection Fund and to balance that against the need to preserve functioning and ongoing sponsors during the current emergency. Can my noble friend help the Committee understand what powers this grants to the Pension Protection Fund? I recognise, and we discussed through the passage of the Corporate Insolvency and Governance Act, that there is a limit on the power of the Pension Protection Fund. I appreciate the Government’s amendments, which have introduced some representation, but, for example, if trustees, as was suggested by the noble Baroness, Lady Drake, prefer to approve a high-risk restructuring strategy but the board of the Pension Protection Fund believes the risk is too high and would result in higher costs to it when the company fails—as the board believes would be most likely given the balance of risks that that restructuring would entail—would it have the power to override the trustees and to refuse to agree the proposed course of action and, ultimately, ensure that the company fails sooner rather than later, or would that not be within its powers under the new system?

Equally, if the management of the company wishes to try to sell assets that have already been pledged to the pension scheme and apply to a court to permit this—I understand the corporate insolvency Act permits the authorisation of the sale of such assets and the PPF must be informed or consulted—does the PPF have powers to protect itself against such a transaction on which the funding of that defined benefit scheme had previously been based? What representations might it be able to make in the court environment? Does it have the power to demand detailed information or to conduct its own investigations into the financial position of the company when it is aiming to restructure or undertake some asset sales? Does the Pension Protection Fund have the power to investigate the impact of any loans or other restructuring agreed in a moratorium that might be beneficial to favoured lenders or, ultimately, to the owners of the company, who might end up taking over a restructured operation, having jettisoned the pension fund to the detriment of the funding of the pension scheme when it goes into the PPF?

How do the Government plan to deal with schemes when banks or other lenders to a company during a moratorium attempt to leapfrog ahead of the pension scheme on insolvency, should that occur. At what stage does the Pension Protection Fund have any power to prevent this happening or to be able to intervene to represent its interests if it believes such loans are suspect or may be intended to game the PPF? I have given prior notice of these questions to my noble friend and was grateful to hear that Ministers have some ability to override some of the potential risks to pension scheme members and to other pension scheme members.

I know that it is important to make sure that the Pension Protection Fund—

[Baroness Scott of Bybrook (Con)]

My Lords, there is a five-minute limit.

[Baroness Altmann (Con)]

I apologise.