The UK government has published consultation on controversial
changes to the moral hazard powers of the Pensions Regulator. Some
of these changes took effect from 14 April 2008, when an initial
announcement was made. A statement has been issued by the Pensions
Regulator limiting the retrospective application of the new
provisions. The proposals have caused great concern in the private
equity and venture capital industry with suggestions that many
deals have been put on hold because of fears of the extent of the
new powers. Draft legislation is not expected until the autumn.
What is moral hazard?
The powers to issue contribution notices and financial support
directions were first introduced in April 2005. The main purpose is
to prevent employers walking away from occupational pension scheme
debts. Notices and directions issued by the Regulator can require
the immediate payment of up to the full deficit in the pension
scheme on an annuity buy out basis. They can be
