Reuters reports that the Regulator said it intended to issue its first Financial Support Direction (FSD) to Sea Containers, which operates the British GNER rail franchise, requiring the firm to put a £91 million ($181 million) into two plans.
Pension experts seem confused by the choice of firms to which to issue the first FSD, the news report said. The fact that the Bermuda-domiciled group is already in Chapter 11 bankruptcy protection from its creditors in the U.S. will make it difficult for the Regulator to enforce its power.
One speculation is that the watchdog chose Sea Containers because the firm ignored previous warnings by the Regulator. Dave Robertson, a principal in the financial strategy group at consultancy Mercer, said it could also be that the Pensions Regulator is trying to set an example for other foreign organizations that think they can skirt their U.K. pension obligations.
However, Jerome Melcer, a pension consultant at Lane, Clark & Peacock, said it could be that if it tried to enforce its powers in a simple case and failed, that would destroy its credibility, according to Reuters. Choosing Sea Containers provides a number of excuses in case of failure he said.
The move is timely, as industry leaders and employers were beginning to question the Regulator’s ability to enforce funding. The watchdog has been in existence for two years.
A three-year strategic plan mapped out by the Regulator last month included a focus on boosting funding (SeeUK Pension Regulator Maps Out Three-Year Plan).