Business Times (London) May 15, 2004 Directors face loss of personal assets in new pension powers By Christine Seib
DIRECTORS and shareholders could be stripped of personal assets if they deliberately deprive their company's pension of funding, under a Bill to be debated this week.
Amendments to the Pensions Bill would give the new pensions regulator, due to come in in January 2005, wide-ranging powers to obtain compensation from directors and shareholders.
But lawyers said that the amendments, which are retrospective from June 11 last year, may be unlawful under the Human Rights Act and other legal conventions.
Amendments to sections 35 and 40 of the Pensions Bill were designed to stop companies from dumping their pensions liabilities on the Pension Protection Fund (PPF).
The PPF was established to pay the pensions of workers whose employers have collapsed, leaving them with nothing despite years of paying pension contributions. It will be funded by a levy on employers and, with the rest of the Pensions Bill, will come into effect in April
2005.Under the new rules, if companies purposely dispose of money that they should have used to prop up their pension fund, the regulator will be permitted to recoup the money from the company itself, any subsidiaries, the directors and shareholders.
The regulator could construe paying dividends or transferring assets as purposely depriving the pension fund.
The Department for Work and Pensions (DWP) said that it had already discovered cases in which companies had intentionally dumped their liabilities on the PPF, which was why the rules were made retrospective. Malcolm Wicks, the Pensions Minister, said that the amendments would "safeguard the integrity and sustainability of the PPF".
But lawyers said that there was plenty of scope for companies and individuals to fight the compensation orders.
Hugh Arthur, of Macfarlanes, said: "There is a serious question mark over the legality of what is being proposed by the DWP. People could plead under the Human Rights Act that it wasn't illegal when they did it and how could they have known it was going to become so."
Wyn Derbyshire, of SJ Berwin, gave warning that companies could take action to deprive their pension fund of money without shareholders' knowledge, leaving shareholders liable for compensation.
He said: "It gives a lot of power to the regulator, which would be acting as judge and jury, and I can't see any way for people to appeal against it.
"Punishing actions that were perfectly legal at the time they were taken has to lead to problems."
The DWP said that it was certain that the amendments were legal. A spokesman said: "We did take legal advice and we think we're sound with that."
The Bill is to be debated in Parliament next week.
Pension offer worth £350
ABOUT 60,000 workers who have lost the bulk of their retirement savings will gain just £350 a year in damages from the Government in a bailout scheme unveiled yesterday by Andrew Smith, Work and Pensions Secretary.
Experts condemned the £400 million offer, saying that the figure was likely to fall short of the sum necessary to help all of the workers who have lost out.