Pensions minister Torsten Bell is to review final salary pension transfer rules after Edinburgh-based investment giant Aberdeen agreed to become the sponsoring employer of the £1.2 billion Stagecoach Group Pension Scheme (SGPS).
Under a novel arrangement, announced in December, Aberdeen will take on responsibility for the scheme’s funding as well as management of its £1.2 billion of assets.
Mr Bell said in a statement: “We are taking action to ensure the strong regulatory framework for defined benefit pensions remains effective as innovation develops, to manage future risks and protect member benefits.
“We want to encourage innovation that has the potential to benefit scheme members throughout the pension system and need to ensure the right legislative guard rails are in place for this to happen safely.”
Flexible Apportionment Arrangements (FAA), the legislative mechanism used in this transaction, were introduced in 2012. They were designed to ensure that corporate restructurings, mergers, and sales do not cause employer insolvency events when there is an appropriate sponsor who can support the scheme.
“Whilst this transaction complied with the existing FAA mechanism it did so in a way not anticipated when the mechanism was introduced,” said Mr Bell.
“We therefore intend to review this area of legislation to ensure the regulatory standards and safeguards evolve and keep pace with the innovation we are seeing in the pension market.
“This is to protect members and the Pension Protection Fund, which is there to protect people’s pensions in the event of an employer insolvency.”
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