Looks likely. The FT reports:
Moves that would weaken the protection for pension schemes are to be considered by ministers, the government will announce on Wednesday.
Rosie Winterton, pensions minister, will announce that she is bowing to a big demand of employers by consulting on changes to so-called Section 75 – which compels any business winding up a pension scheme as part of a corporate restructuring or demerger to cover fully its liabilities. The issue has become more pressing for businesses as falling stock markets have increased pensions shortfalls.
In remarks prepared for a breakfast meeting of CBI employers, Ms Winterton will say that the moves are aimed at easing the burden on scheme sponsors which are coming under strain in the current economic climate, and who “remain committed to the scheme”. The “debt on the employer” rule has been a source of irritation to business since it was enacted, with many companies complaining that it has been a barrier to corporate activity.
Section 75 – enacted in 2004 – closed a loophole that cost about 125,000 pension scheme members all or part of their retirement funds. It was prompted by the case of Maersk, the Danish shipping line, which tried to walk away from the pension liabilities of its UK subsidiary even though it remained solvent.
The original rule was adopted on an emergency basis as plunging stock markets and falling gilts yields unmasked record deficits at UK companies and after new accounting rules for the first time made the size of those deficits transparent to investors. Companies, on realising the extent of their pension debts, sought to reconfigure themselves to avoid responsibility.
Ms Winterton will say the Department for Work and Pensions has begun a four-week “informal consultation” on the matter. In her remarks, Ms Winterton is set to acknowledge that balancing the needs of employers and pension security is a delicate act. But Ms Winterton will tell the group: “If we can, we will hold a full public consultation in February and introduce any changes in October 2009.”
In anticipation of the likely backlash from pensions groups, Ms Winterton will say that the department will seek industry’s views on the options for not triggering a debt “where the employer remains committed to the pension scheme”. However, it was unclear on Tuesday night what this might mean.
The risk to government is that if the change goes wrong, more schemes could be forced to rely on the Pension Protection Fund.