On the go: The Sanofi Pension Scheme has received a new guarantee package from its sponsor, including additional protection of up to £730m in the event of insolvency in the next 20 years, following intervention from the Pensions Regulator.
The deal, which was established with Sanofi SA, the parent company of the healthcare group, includes an agreement on annual deficit repair contributions designed to ensure that the scheme becomes fully funded against a prudent long-term funding target, alongside an upfront payment into the defined benefit pension fund of £37m.
The sponsor also signed a legally binding agreement, which means that any dividends paid to the wider group are matched by payments into the scheme for the same amount, TPR stated.
The watchdog opened an investigation in 2019 after concerns about the scheme’s covenant strength.
After several restructures there were several UK-based companies in the group, which include the remaining statutory employers of the Sanofi section of the Sanofi Pension Scheme – which in 2018 had around 16,500 members, an ongoing funding deficit of £279m, and an estimated buyout deficit of £1.7bn.
According to TPR, the statutory employers supporting the scheme changed multiple times in the past few years.
“Some of these transactions resulted in significant dividends being paid to other companies within the group, and while the pension scheme had received some mitigation as a result of the restructures, the direct covenant supporting the scheme had weakened,” the regulator stated.
Despite some support provided to the scheme through deficit repair contributions, guarantees, and a non-legally binding dividend matching agreement introduced in 2015, TPR was not convinced that “the remaining employers would be able to repair the deficit without additional support from the group”.
After the regulator indicated that it intended to issue a warning notice seeking a financial support direction, further settlement discussions led to the new agreement, which “increased the likelihood of savers receiving their full benefits”, it stated.
Erica Carroll, TPR’s director of enforcement, said: “This case demonstrates how productive negotiations can be carried out alongside our investigations so that the best possible outcome is achieved for savers.
“We signalled our intention to use our anti-avoidance powers, which prompted Sanofi to engage in meaningful discussions with us and the scheme’s trustee.”
