Lords bill seeks to give TPR dividend approval and scrap PPF cap

Conservative peer Lord Balfe introduced the private members’ bill on Wednesday, which would amend both the Companies Act 2006 and Pensions Act 2004.

While the regulator is already being granted “nuclear” powers to fine and even imprison errant bosses under the pensions bill announced in October’s Queen’s Speech, the amendment tabled last week would go much further.

It forbids companies from making distributions to their shareholders without the consent of both the trustees of the company’s defined benefit pension scheme and TPR, giving the watchdog enormous control over UK corporate activity.

“A public company may only make a distribution if it has received written approval for the proposed distribution from... the trustees of any pension scheme responsible for the pensions of current or former employees of the company, and... the Pensions Regulator,” the amendment reads.

In addition, the bill would also amend the Pensions Act to remove the cap on member compensation paid by the PPF.

PPF members who have not yet reached their scheme's normal pension age see their benefits cut by 10 per cent. The maximum total payout after this reduction is limited to £36,018 a year for a 65-year-old, which is then adjusted depending on the member’s age.*

Following a landmark legal ruling, the PPF now has to upgrade the pensions of any member who receives less than half of their original entitlement due to the cap.

A further EU court case could force lifeboat funds to pay out benefits in full if it is successful, but Lord Balfe’s bill pre-empts this outcome by forcing the PPF to pay benefits in full.

Despite the far-reaching nature of the suggested reforms, a leading pensions lawyer said the changes were unlikely to go ahead.

Anne-Marie Winton, a partner at Arc Pensions Law, said: “It hasn’t got a chance of getting anywhere, not least due to the upcoming election, but may well be a deliberate attempt to reopen the drafting of the bill post election and revisit whether there should be statutory pensions restrictions on the payment of dividends.”

*This article has been updated to clarify an inaccuracy on the benefits paid out by the PPF.