This article is part of the PLC Global Finance August 2010 e-mail update for the United Kingdom.
A Belgian company, VDW, has been ordered by The Pensions Regulator to pay £5.1 million to the UK pension scheme, despite VDW not being a scheme employer.Close speedread
Employers attempting to avoid defined benefit pension scheme liabilities received a sharp warning from The Pensions Regulator (TPR) when the first contribution notice under the Pensions Act 2004 was issued in June. A Belgian company, VDW, which sold its UK subsidiary under a pre-pack insolvency in 2006 and left its pension liabilities for the Pension Protection Fund, has been ordered by TPR to pay £5.1 million to the UK pension scheme, despite VDW not being a scheme employer.
The power to issue a contribution notice applies where an act or a series of acts causes material detriment to a scheme. TPR's determinations panel considered this issue and then evaluated the main purpose of the act or omission.
The panel also considered whether it was reasonable to impose liability on VDW and its chairman personally.
VDW controlled Bonas at all material times.
VDW's conclusion that Bonas' business was unsustainable was driven exclusively by the pension liabilities.
The adoption of the pre-pack process was planned to retain Bonas' business assets and employees, while establishing a new company without the pension liabilities.
VDW concealed its plans from the scheme's trustees and TPR.
VDW was advised that TPR might intervene but chose to run that risk.
The panel concluded the sum sought was reasonable since that amount was required to restore the scheme to solvency. No contribution notice was issued against the chairman.
The main issue for TPR was VDW’s decision to conceal its pre-pack plans from both TPR and the trustees. The panel also noted that VDW chose to gamble that an overseas parent company would not be pursued. Companies which do not engage openly with their scheme trustees regarding pension scheme liabilities are likely to become subject to TPR's enforcement action. It is expected that VDW will appeal.