I would be surprised as well.
My Lords, I support the thinking behind both these amendments. I congratulate the noble Lords, Lord Vaux and Lord Balfe, on the excellent way in which they have been introduced. Both amendments allow timely discussion of what is a large, widespread and probably growing problem.
After the publication of TPR’s annual funding review in March 2019, the Investment & Pensions Europe magazine reported that TPR had
“vowed to engage with a number of schemes this year if recovery periods were considered to be ‘unacceptably long’, and warned trustee boards to expect communications in the coming months. … Consultancy firm Hymans Robertson estimated that one in five FTSE 350 companies with DB schemes were at risk of intervention from TPR.”
That is an alarmingly large number.
To understand what TPR means by “communications”, it helps to look at what TPR in its annual funding review states as the three key principles behind its expectations. The first is:
“Where dividends and other shareholder distributions exceed DRCs, we expect a strong funding target and recovery plans to be relatively short.”
The second is:
“If the employer is … weak”
or tending to weak,
“we expect DRCs to be larger than shareholder distributions unless the recovery plan is short and the funding target is strong.”
The third is:
“If the employer is weak and unable to support the scheme, we expect … shareholder distributions to have ceased.”
These are all fine principles—in principle. The real question is how, or whether, they are in fact working. How many FTSE 350 companies has TPR intervened on in the last 12 months, and on how many occasions has it advised against or prevented shareholder distributions? Perhaps the Minister could give us an assessment of TPR’s success in applying its three key principles.
Both amendments in this group offer a simpler and different approach to restrictions on shareholder distributions, but in contrasting strengths. Both have
the merit, it seems to me, of making responsible behaviour by employers more likely, and that is no small thing if there are 70 FTSE 350 companies out there needing effective intervention to protect employees’ pension rights. I look forward to the Minister’s response.