The trade body of the private equity industry has attacked Government plans to hand more powers to the pension regulator, claiming they will undermine the UK economy at a time when it is already slowing down, The Telegraph says.
The British Private Equity and Venture Capital Association (BVCA) is concerned that the proposed changes will deter takeovers of UK companies and reduce investment from private equity companies.
“The proposals do further damage to the UK’s position as a competitive place to do business – after a period where that position has already been considerably eroded,” says Simon Walker, the BVCA’s chief executive in a letter to Mike O’Brien, minister for pensions reform.
The Government earlier this year pushed through an amendment to the Pensions Bill – which is currently going through the House of Lords – that will make it easier for the pensions regulator to appoint its own trustees. Under the proposals, the regulator could also block takeovers where there is a defined benefit scheme involved – one in which pension payments are based on an employee’s salary when they retire. The bill is due to be debated further this week.
“The result of this is that sponsors of defined benefit schemes will not receive the additional investment BVCA members bring, nor gain from the valuable management skills they add,” the letter from the BVCA says. It adds that several deals have collapsed since the proposed changes were first announced.
The move by the Government comes as more and more companies seek to pass on their pension schemes, and the risk that goes with them, to buyout specialists. O’Brien says that it is the Government’s responsibility to “ensure that risks are appropriately managed” within the pensions buyout market as new providers and business models emerge.
In 2008, about 2.5 billion worth of schemes have been passed on from companies, including miner Lonmin, life assurer Friends Provident, and casino and bingo group Rank. Telecoms group Cable & Wireless is also seeking to pass on risks relating to its 2 billion pension plan.
In the letter to O’Brien, Walker contends that “pension schemes already have three levels of protection: firstly the trustees, then their statutory advisors who have whistle-blowing duties, and thirdly the regulator.”
The argument over the proposed changes comes after it emerged that three-quarters of pension schemes are now in deficit after almost 36 billion was wiped off the value of the country’s top 200 privately sponsored pension schemes in June.
Falling equity markets have taken billions off pension funds as the FTSE All-Share Index, in which most pension funds invest the bulk of their assets, fell by almost 10 per cent in June because of continued concerns about the credit crisis.
The BVCA argues if the Government wants to regulate the buyout market it has to devise a new regime.