David Prosser: Common sense from the Pensions Regulator

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Outlook The latest technical briefing from the Pensions Regulator makes interesting reading, explaining, as it does, the circumstances in which it might allow an employer to walk away from its responsibilities for a pension scheme (leaving the Pension Protection Fund to pick up the tab for pension promises).

As one would expect, the Regulator warns such determinations are likely to be exceptionally rare. The employer would have to show that being forced to stick by its scheme would inevitably lead to its insolvency, and to meet a number of other criteria, too.

Still, while the idea of an employer being able to cut itself off from its pension scheme in this way is hardly an attractive one, the Regulator's latest guidance will be welcomed by those who have expressed growing anxieties about some of its rulings of late.

The Reader's Digest case, for example, saw the British end of the business placed in administration after the Regulator ruled against the company's proposals for paying down the pension scheme deficit. There are worries that the food producer Uniq may be heading the same way following a similar disagreement.

These cases are a difficult call for the watchdog. As it works to minimise the chances of pension scheme members being forced to turn to the Pension Protection Fund, which is funded by solvent schemes, it cannot and should not ever give employers an easy ride. Equally, there is little point in taking such a tough line that companies are driven out of business. That means employees lose their jobs and members end up with the compensation fund anyway. Yesterday's guidance at least hints of the possibility of compromise in the clearest cases.