Regulator Issues FSD Statement

26 July 2012 (PLANSPONSOREurope.com) - The Pensions Regulator has today published a statement on financial support directions and insolvency to help banking, insolvency and restructuring professionals understand its approach to its Financial Support Direction (FSD) power where plan sponsors become insolvent.

In 2010, the High Court ruled that FSD liabilities rank as an expense in an administration. This was upheld by the Court of Appeal last year. Concerns were expressed that the judgment could frustrate the administration process and make banks more reluctant to lend if their debt did not have priority over an FSD in insolvency.

The Regulator says there are “substantial” reasons why, in practice, fears about the potential impact of the Nortel-Lehman judgment upon the 'rescue culture' are unlikely to be realised, adding it has highlighted these issues before but is happy to be able to respond to industry requests for further reassurance with a published statement.

Stephen Soper, executive director for defined benefit regulation, said: "We fully recognise the importance of an effective restructuring and rescue culture, and do not intend to frustrate its proper workings, nor those of the lending market. We've met with many of the key players in the sector to explain our approach and we hope that today's statement provides further reassurance."

National Association of Pension Funds (NAPF) Director of Policy Darren Philp said: “This can be a contentious and confusing issue, and it’s good to see the Regulator lay down some guidelines on its approach.

“The Regulator says it is alive to the concerns that have been raised, and stresses it will take account of directly affected parties. We hope this will help calm fears that will inhibit legitimate insolvency or restructuring. However, the real test will be how the Regulator responds to individual cases that arise in the future.”

PLANSPONSOREurope Staff
editors@plansponsoreurope.com