UK – The chairman of the UK’s pension regulator has outlined the body’s priorities in the wake of its involvement in the insolvency of insurance broker Heath Lambert.

“So in clearing corporate transactions, the Pensions Regulator has three priorities,” said David Norgrove.

These were “to ensure there is no moral hazard (or, in other words, make sure that companies are not dumping their pension liabilities on to the Pension Protection Fund); to maximise the recovery of any deficit; and to safeguard jobs where possible”.

The letter follows the regulator’s approval of a deal whereby the PPF has agreed the benefits to members of the schemes. In return it would take a reported 10% stake in the company.

“The key first test is whether the company would inevitably become insolvent without this action,” Norgrove wrote in a letter to the Financial Times.

“The next question is the amount that the pension scheme would receive in the event of an insolvency. This has to be compared with the possible upside from an equity stake.”

He argues that allowing the pension fund – not the PPF - to take an equity stake means there is no downside risk to the PPF. He expected cases where an equity stake was taken would be “very much in the minority”.

“The Heath Lambert case around out the clearance powers granted to the regulator with a view to preventing the moral hazard powers from interfering with proper commercial activity and the preservation of viable companies.”

Meanwhile, the Times reported that the issue of equity stakes would be raised by the National Association of Pension Funds at a meeting with PPF chairman Lawrence Churchill today.