In a TPR review of DB pensions schemes between September 2018 and 2019, the Regulator analysed the ratio of deficit repair contributions to dividends paid by employers in the FTSE350 and discovered that those with defined benefit schemes paid on average 14 times more in dividends than in pension contributions.
The Financial Times reported earlier in the year that over 100 companies were paying, on average, six times more in dividends than in pension contributions. Nicola Parish, the Executive Director of Frontline Regulation at TPR specifically stated the Regulator’s intention to continue to intervene in companies where there is a concern that the DB scheme is not being treated fairly by an employer and working with trustees and employers to secure appropriate recovery plans and acceptable deficit repair payments.
TPR’s recent Compliance and Enforcement Bulletin listed various examples of the Regulator’s achievements and overall tougher approach against anyone failing to meet their legal pension duties, including their first fraud conviction due to stricter regulation (for making prohibited Employer Related Investments), their first custodial sentence as a result of TPR prosecution and their largest fine to a trustee to date, totalling £104k.
This firm line being taken by TPR demonstrates the Regulator’s intention to ensure that pension schemes are being treated equitably with other stakeholders, including shareholders and particularly where payments to shareholders limit an employer’s ability to support the scheme.
Argyll comment: the article is evidence of TPR’s tougher stance on funding and recovery plans in light of the March 2019 Annual Funding Statement. As ever, a balance needs to be struck between paying dividends and repairing pension scheme deficits. The best support for a pension scheme is a viable ongoing sponsor and businesses sometimes need shareholder support for financing which is unlikely to be forthcoming if no dividends are paid.