Pensions Bulletin 2018/34

Our viewpoint

Government announces crackdown on “reckless directors”

Reforms to corporate governance and insolvency law could result in directors who have dissolved companies to avoid paying workers or pensions being disqualified or fined by the Insolvency Service for the first time.

This is the leading proposal contained within an announcement by the Department for Business, Energy and Industrial Strategy on 26 August, which follows on from a consultation on insolvency and corporate governance launched in March (see Pensions Bulletin 2018/13).  However, the more significant proposals for pension schemes, as set out in the response document, include the following:

  • The UK’s framework relating to the payment of dividends is likely to be strengthened on a number of fronts, particularly where a company’s pension scheme is in significant deficit. On this, although the Government says that “it agrees with strongly held views that there should be no automatic bar on companies paying dividends in these circumstances”, it “will…give further consideration to ways in which directors could provide stronger reassurances for shareholders and stakeholders that proposed dividends will not undermine the affordability of any deficit reduction payments agreed with pension fund trustees”.  This is to be looked at “as part of the consideration of fuller disclosure of capital allocation decisions and the case for a review of the UK’s dividend regime”
  • Directors of a holding company that do not give due consideration to the interests of the stakeholders of a financially distressed large subsidiary when it is sold may be subject to disqualification action if that subsidiary enters insolvent liquidation or insolvent administration within 12 months of the sale – such stakeholders are likely to include the pension scheme

The Government also wishes to see progress on stewardship issues, including the promotion of consideration of ESG issues, noting that there will be a “major opportunity” through the revised Stewardship Code, on which the FRC will be consulting later this year.  It also notes the current consultation on new regulations that require pension trustees to set out in their Statement of Investment Principles from October 2019 (see Pensions Bulletin 2018/25):

  • How they take account of financially material considerations, including those arising from environmental, social and governance considerations; and
  • What their policies are in relation to the stewardship of their investments, including their engagement with investee firms

whilst also confirming that the UK intends to implement the revised EU Shareholder Rights Directive from June 2019 (see Pensions Bulletin 2017/22).


This is a fascinating set of wide-ranging announcements on corporate law, clearly influenced by recent failures with pension implications – such as BHS and Carillion – and will directly change the way some UK companies are run.

Of greatest interest to pension schemes are any changes to the law governing the payment of dividends.  Quite where the Government will land on this issue (and by when) is not yet known, but it does seem that we are headed for a new disclosure requirement for the company accounts.  This in turn may mean that it will not be necessary for the Pensions Regulator to include dividend payments in its expanded list of notifiable events, on which consultation recently closed (see our News Alert).

Brexit no deal – expats could lose access to insured pensions?

This appears to be the one item of pensions significance in the first release on 23 August of Government technical notes on how to prepare for the UK leaving the EU without a Brexit deal.

In the Banking, insurance and other financial services paper, the Government says that, “in the absence of action from the EU, EEA-based customers of UK firms currently passporting into the EEA, including UK citizens living in the EEA, may lose the ability to access existing lending and deposit services, insurance contracts (such as a life insurance contracts and annuities) due to UK firms losing their rights to passport into the EEA”.

It seems that there is a clear risk that UK insurers may not be able to continue to make pension payments into non-UK bank accounts from which British expats are used to drawing their pension.


This is not “news” with the ABI warning about this in evidence given to the Exiting the European Union Select Committee on 24 July.  The subject has also come up before when last September, Nicky Morgan MP, who chairs the Treasury Select Committee, wrote to the Chancellor of the Exchequer warning that a deal needs to be reached on insurance contracts in the EU post-Brexit, or insurance companies won’t be able to make payments on existing contracts.

Pensions Regulator updates its pension scams material

Following on from the announcement of the new advertising campaign (see Pensions Bulletin 2018/33) the Pensions Regulator has refreshed its pension scam materials.

They now comprise a four-step pension scams guide for individuals, a scheme transfer checklist for trustees and administrators, posters for employers to display in the workplace, and web content for trustees and providers.  The Regulator would like the latest guide included in member statements and transfer packs.

This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law.  For further help, please contact David Everett at our London office or the partner who normally advises you.

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