The Pensions Regulator has written to the Occupational Pensions Trusts (OPT) slamming suggestions the regulator endorses the trust.
The OPT launched the initiative on Monday as an alternative to buyouts by insurance companies.
As revealed by IFAonline yesterday, the regulator questionned the benefit of OPT for trustees but has now deemed it necessary to write to the firm.
The letter from Tony Hobman, chief executive of the Pensions Regulator, to Ben Shaw, development director of OPT, attacks an earlier statement from the trust, which also suggests the regulator would not require a clearance statement when transferring pension scheme ownership.
Hobman says: “Can I make it absolutely clear that the regulator does not endorse vehicles such as that being promoted by your company.
"Any conversations between OPT and ourselves could not and should not be construed as endorsement.
“I was concerned to see that you suggest that requesting a clearance statement is unlikely to be necessary as this will not constitute a type A event.
"A change of ownership, such as is suggested by OPT when taking on pension schemes, is a type A event.
"If a clearance statement is not issued the transaction may still proceed, but there is no assurance that our powers will not subsequently be used.
“The regulator has made no comment on ‘blocking’ transactions, regardless of whether trustees believe they are in the best interests of members.
"The regulator has no power to stop any transaction from going ahead. Each application for a clearance statement is considered on a case by case basis dependent on the individual circumstances and we are unable to give any formal assurance until presented with the full details of that case.
"The scheme trustees have a fiduciary duty to consider the best interests of members and as such should give careful consideration to any proposals.
“It is also misleading for you to suggest that we have indicated that we wish to review each individual case, or that we would ‘review investment management strategy.’ We will look at any scheme that comes to our attention where there are risks to members’ benefits or to the Pension Protection Fund.”
Yesterday Shaw told IFAonline the Pensions Regulator only disagreed with the OPT’s use of the phrase ‘extensive discussions with potential members and the Pensions Regulator' in its statement.”
He says: “We’ve spoken to the regulator on a reasonably large number of occasions to invite them to look at our model. Last year we had in-depth discussions with them.
“In principle they’re not opposed to what we’re trying to do. What they would like us to do is bring a case to them where the trustees believe it’s the right thing to recommend and they’re not inclined to block transaction the trustees are approving. What we’ve said to them is fine.”
Shaw said in a statement firms nationwide would welcome the initiative as it provides a stronger, and cheaper, alternative to a buyout by an insurance firm.
He said it allows all member schemes to continue to be run under existing arrangements but overseen by a team of professional independent trustees.
Schemes joining OPT receive an immediate cash injection from the incumbent sponsoring company in return for removing the employer covenant, enabling it to continue operating at a significantly higher funding level.
OPT, which currently has no members but says it is in discussions with several prospective parties, expects to offer schemes a joining fee between 10% and 20% cheaper than the cost of a full buyout by an insurance company.
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