New rules on moral hazard, announced in April 2008, have
now been tabled as amendments to the Pensions Bill. According to
the Government the new powers have been framed "so that they
do not have an undue impact on legitimate business activity".
As expected, the Pensions Regulator is to be given wider powers to
issue contribution notices. These provisions will be supported by a
code of practice to be issued by the Regulator. We summarise the
new rules and consider how this might affect corporate
behaviour.
INTRODUCTION TO CHANGES
The "moral hazard" powers enable the Pensions
Regulator to issue contribution notices and financial support
directions against those involved in defined benefit occupational
pension schemes to prevent liabilities being "dumped" on
the Pension Protection Fund and to protect member security.
In May 2008 we issued a
briefing outlining the proposed changes as originally
announced.
