The Pensions Regulator ready to "intervene" and force big dividend payers to plug deficits

Oliver Gill
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The Pensions Regulator wants big dividend paying firms to shorten the amount of time they take to reduce deficits (Source: Getty)

The UK pensions watchdog today growled in disapproval at a growing trend for companies to boost cash pay outs to shareholders while dragging their heels on making good pension shortfalls.

The Pensions Regulator (TPR) warned it would "intervene" in individual circumstances where schemes were being treated unfairly.

In a review of Britain's defined benefit pension schemes published today the TPR said British corporate profits have grown over the last three years.

Read more: Watchdog cracks down on firms paying dividends over funding pensions

But as dividend paid have increased, there has not been an associated increase in payments into so-called deficit repair contributions, in other words, the amount paid to plug pension holes.

TPR executive director for regulatory policy Andrew Warwick-Thompson labelled the findings "disappointing", adding: "We are not against companies paying out dividends but employers must strike the right balance between the interests of the scheme and that of its shareholders."

The pensions watchdog has firmed up its rhetoric in recent months in the wake of a number of high profile pension scheme failures. Last month it revealed plans to ramp up its scrutiny of company proposals to reduce deficits.

Read more: Pensions watchdog takes a closer look at the rest of Green's empire

And Warwick-Thompson added scrutiny will be turned into action. He said:

If we see a situation where we believe a scheme is not being treated fairly, we are likely to intervene. For example, if a company is paying out more in dividends than in deficit reduction contributions, we will expect to see a short recovery plan.

Separately, the UK pensions lifeboat, the Pension Protection Fund (PPF) reported the aggregate deficits of Britain's final salary schemes. Shortfalls fell during May from £245.6bn to £223.2bn by the end the month.

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