Pensions Bulletin 2021/10

Our viewpoint

Silentnight – Pensions Regulator settles action against private equity firm

The Pensions Regulator has settled its long running regulatory action against HIG, the US private equity buyers of the Silentnight bed manufacturers, for £25m.

The Regulator’s regulatory intervention report sets out how it used its current anti-avoidance powers following HIG’s acquisition of the Silentnight employers in 2011 following a controversial pre-pack administration.  This pre-pack resulted in the Silentnight DB scheme, which at that time had a deficit on a buy-out basis of £96.4m, being detached from sponsor support.

The Regulator’s case was that HIG, in acquiring the employers’ bank debt, used its position as lender to bring about the unnecessary insolvency of the employers.  The Regulator then alleged that HIG then took steps to buy the employers’ business at an undervalue as part of the administration process that followed.

The Regulator issued two warning notices in 2014 and 2016 that it intended to issue contribution notices against various current and previous entities and individuals in HIG.  The first warning notice, based on an undervalue assessment, was for £17.2m - this increased to £96.4m in the second notice when the Regulator took the view, along with the trustees, that the sale had been unnecessary and HIG had directly caused the insolvency.  HIG unsuccessfully challenged the second warning notice when the first was in play using judicial review (see Pensions Bulletin 2017/03).

Shortly before the Determinations Panel hearing to determine whether or not contribution notices would be issued HIG made an offer to settle.  The Regulator accepted this because, while it is not sufficient to eradicate the PPF deficit, the Regulator had to consider the value of the upfront cash sum, the risks and costs of litigating complex and long-running regulatory actions and the continued uncertainty for the scheme members.


So, a decade down the line, the pension scheme heads into the PPF with £25m more than it would have had if the Regulator had not intervened, but still deep underwater.  It is not a bad result for the Regulator and one can easily see why it took the decision that it did.

What is particularly interesting to think about is whether events would have unfolded as they did if the new criminal offences created by the Pension Schemes Act 2021 (see our insight hub) had been in force in 2011.  It is hard to conclude that they would; or if they did then some of the principals might have had an uncomfortable time of it, legally speaking.

Back to the top

Pension Schemes Act 2021 regulations timetable revealed

In a written statement to Parliament Guy Opperman has set out a timetable to progress the necessary secondary legislation in order to implement the various provisions in the Pension Schemes Act 2021.  It is as follows:

  • Climate change – regulations will be laid this summer to come into force ahead of the UN Climate Change Conference being hosted by the UK this November
  • Pensions Regulator’s Powers – the DWP will consult on the majority of draft regulations this spring and will commence these powers and the criminal offences measures in the autumn.  For the duty to give notices and statements to the Regulator in respect of certain events, the DWP will consult on the draft regulations later in 2021, for commencement as soon as practical thereafter
  • Pension scams – the DWP plans to consult on draft regulations in early summer and commence the new measures from early autumn
  • Collective Defined Contribution Schemes – the DWP plans to consult on draft regulations in early summer
  • Pensions dashboard – the DWP aims to consult on proposed regulations later this year and lay draft regulations before Parliament in 2022, with delivery still on track for 2023
  • Scheme funding – the DWP promises to consult on draft regulations later this year, following pre-consultation engagement with key interested parties and working closely with the Pensions Regulator as it develops the revised Funding Code, which will also be subject to a full public consultation


This timetable is broadly as expected, but with one surprise – the consultation on the scheme funding regulations appears to be slipping.  Given this, we would not be at all surprised to find that the Regulator’s timescale for consulting on the revised Funding Code is also put back, with the inevitable consequence that the start of the new scheme funding regime is further delayed.

Back to the top

Start now to get ready for the pensions dashboard

This is the message underlying the Pensions Administration Standards Association’s first edition of their guidance for UK pension schemes, trustees and providers that has been launched this week.  Although pensions dashboards have been talked about for some years, PASA suggests there is now a good logic for scheduling and undertaking some preparatory work, ahead of the material to come from the DWP, the Pensions Regulator and the Pensions Dashboards Programme.  The guidance sets out in high level form what schemes and providers should be doing now and this is usefully encapsulated in a one-page summary.


The pensions dashboard may well be coming, although by when and in precisely what form remains in doubt.  In such a situation the temptation to do nothing is strong.  PASA’s guidance demonstrates that some things can be done or be thought about now, at little cost, putting schemes and providers in a better place for when they have to begin serious engagement with the subject.

Back to the top

PPF publishes guidance on the Corporate Insolvency and Governance Act 2020

The Pension Protection Fund’s restructuring and insolvency team have published interim guidance to the Corporate Insolvency and Governance Act 2020.  Available via their insolvency guidance and support page, their new Guidance Note 9 covers the PPF’s role and likely stance in moratoriums and restructuring plans introduced under the Act.

Amongst the topics discussed in the guidance are that the PPF:

  • Expects to be provided with all the relevant information necessary to permit the proper management of the pension scheme by the trustees including an understanding of the ongoing covenant, existing funding arrangements and the PPF’s exposure to the PPF deficit and drift
  • Considers that any trustees’ vote, exercised by the PPF, should be weighted by the estimated debt due from the employer if section 75 of the Pensions Act 1995 applied

The guidance also sets out the factors the PPF will take into account when deciding its approach to voting on any proposal to extend the moratorium or approving the restructuring plan.

An example form for the notification of moratoriums is set out in the Appendix.

The guidance is subject to alteration and amendment if provisions in the legislation change and as the team see how the new moratorium and restructuring provisions are used in practice.


This is very accessible guidance on two new procedures that have been much talked about, but which to date appear to be have been little used.  All this could change as we come out of lockdown and the Government inevitably starts to bring to an end a number of its employment protection measures.

Back to the top

Pre-pack sales scrutiny – regulations laid

The draft regulations that accompanied the Government’s decision last October that pre-pack sales would be subject to mandatory independent scrutiny in certain situations (see Pensions Bulletin 2020/42) have been updated and laid before Parliament.  Changes made from the October draft include provisions aimed at disincentivising a person obtaining multiple reports in the hope that one would be favourable, and strengthening the requirements for acting as an evaluator by including an obligation to obtain suitable insurance.

The Department for Business, Energy & Industrial Strategy intends to issue guidance to assist those carrying out the newly mandatory scrutiny role to coincide with the coming into force date of the regulations, which is scheduled to be 30 April 2021.


These regulations make mandatory for connected person pre-pack sales a review that was already optional.  But in 2019, only 23 of 260 connected person pre-pack sales voluntarily referred themselves for independent scrutiny.  From 30 April 2021 the scrutineers can expect to be considerably busier.

Back to the top

FRC seeks to improve the quality of ‘comply or explain’ reporting

The Financial Reporting Council has issued guidance for companies on how to report transparently and effectively when departing from certain provisions of the UK Corporate Governance Code.  This follows on from the FRC publishing its review of corporate governance reporting in November.

The Code, last updated in 2018 (see Pensions Bulletin 2018/29), requires companies to give clear and meaningful explanations where they chose not to comply with a provision in the Code and this guidance is intended to assist with this.  In relation to the expectation that executive pensions are aligned with the workforce the guidance says that where such alignment has yet to be achieved an explanation should be provided along with a timeline for alignment to be achieved.


This is a useful accompanying document to the Code and will hopefully help to address the FRC’s concern that there is too much ‘tick-box compliance’ occurring on governance matters in company reports.  However, it may have been published too late to influence the reporting season currently under way.

Back to the top

FRC launches post implementation review of its Technical Actuarial Standards

The Financial Reporting Council has now launched its promised post-implementation review of its suite of Technical Actuarial Standards that were last overhauled in 2016.

A call for feedback has been published, seeking views on the current framework for TASs, TAS 100 and potential actuarial standards in relation to IFRS 17.  The review will be carried out in two phases – focussing first on the TAS framework and the more generic aspects of TASs before going on to examine sector specific TASs.

Some questions are posed in relation to this first phase and in relation to IFRS 17.  Later there will be a further call for feedback on the sector specific issues including TAS 200 and TAS 300.

The call for feedback on this first phase closes on 7 May 2021.  No timescale has been set out by when this review is to be completed.


There is no suggestion in the call for feedback that anything is particularly broken or needs adjustment, although there are specific questions relating to professional judgement, modelling and the statement of TAS compliance.  Whether it will be the FRC that delivers any change to the TAS framework remains to be seen.

Back to the top

No change to AE alternative quality tests for DB and hybrid schemes

September 2020’s call for evidence (see Pensions Bulletin 2020/39) on the alternative tests that employers can use to demonstrate that DB or hybrid schemes being used for auto-enrolment are of a sufficient quality has concluded that there is no need to make any changes to these tests at the current time.

Since the ending of salary-related contracting out in April 2016, the “cost of accruals” alternative test has been widely used by DB and hybrid schemes given the potential complexity of using the default “test scheme” approach.

There was a limited response to the consultation which confirmed, in broad terms, that the original objective of the alternative quality requirements – ie providing simplified quality tests which cater for the majority of DB and hybrid pension schemes – is being met.  There was a request for further pensionable pay definitions to be available in the cost of accruals test but the DWP felt that those schemes affected should use the test scheme approach.

There is also to be no adjustment to the cost of accruals test in respect of members who have voluntarily chosen to lower their contribution rates and hence benefit scales as this is thought to be uncommon and likely to be a diminishing issue.


Our expectation of no change has come to pass on this routine review.

Back to the top

Further delay on transposing CMA remedies into pensions law

A response, including final regulations, to a consultation (see Pensions Bulletin 2019/30) intended to put the Competition and Market Authority’s remedies in relation to its findings on investment consultancy and fiduciary management, into the main body of pensions law, is now not expected until the first half of 2022 according to an update on the DWP’s consultation page.

This transposition was intended to enable the Pensions Regulator to monitor compliance more effectively than under the 2019 CMA Order route, which had always been intended to be temporary.  No reason is given for the delay.


The DWP initiative, announced in March 2019, was intended to have been delivered by 6 April 2020.  The failure to meet this deadline meant that all compliance reporting has had to be to the CMA.  With this announcement, compliance statements due by 8 July 2021 and 7 January 2022 will have to continue to use the CMA route.

Back to the top