UK - The Pension Regulator's extended anti-avoidance powers will be "constrained" by accompanying guidance, Mike O'Brien, the minister for pensions reform has confirmed.

Speaking at a National Association of Pension Funds (NAPF) seminar on the buyout market, O'Brien reassured delegates proposals to extend the TPR's powers relating to the issue of contribution notices and financial support directions will be "targeted".

O'Brien said: "We don't want to cramp the development of the buyout market but there are particular risks we need to deal with. We problem is we don't know broad the area is or the possible permutations of the business model we are concerned about."

As a result, he said although the proposals issued last week give TPR "broader" powers to deal with these areas, the guidance accompanying the powers, which will be part of a consultation published "within the next few days or weeks" will focus on one "particular mischief". (See earlier IPE story: DWP extends TPR buyout powers)

He also pointed out although the deal between Pension Corporation and the Telent pension scheme had "caused some concerns", the firm had resolved its issues with TPR and O'Brien claimed the new powers are "not targeted at Pension Corporation". (See ealier IPE story: Pension Corporation agrees to TPR approval)

O'Brien said: "[TPR powers] will be constrained - in a kind of self-denying ordinance. When the power is used the guidance will be available to judges if it went to court, and would be evidence in any legal case," he added.

O'Brien emphasised the extension of the powers was an important part in retaining and rebuilding trust in occupational schemes, as "a pension should equal a promise" and "not just a commodity to be bought and sold".

As a result, he pointed out, while insured buyouts can often be "very sensible and effective mechanisms for securing the pensions promise" the government and industry "must be careful not to inadvertently sacrifice hard-won trust in pensions for the sake of a new market solution".

He therefore warned in the future any "new approaches" to pension scheme risk management should have a "similar level of security" to those provided by sponsoring employers and FSA-regulated insurers - which means there "should be capital or other supporting structures underpinning the risks".

However, as the consultation on the proposed extension of the powers and the guidance has yet to be published, O'Brien suggested any uncertainty over whether planned transactions would trigger the powers could be answered through TPR's clearance process.

In particular, the minister confirmed if an employer receives clearance for a transaction now, this would take into account the current proposals so it will also be protected from TPR's extended powers when they come into effect.

That said, O'Brien claimed a "significant" increase in clearance applications i not expected so the existing time frames for processing applications should not be extended.

He added: "New ideas can help us to adapt to changes we face as our society ages. But I also recognise we need to ensure regulation keeps pace with a changing market. My forthcoming consultation document will set out how we will ensure key risks are managed effectively."

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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