In depth

Pensions legislation and case law update: the latest developments week ended 18 June 2021

Gateley Legal

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In this week’s update, we look at the regulatory intervention report on the Sanofi Pension Scheme, the extension of the deadline on the consumer journey call for input and the PMI’s launch of a new lay trustee accreditation regime.

Regulatory intervention report on the Sanofi pension scheme 

The Pensions Regulator (the Regulator) has published a regulatory intervention report detailing how it worked with Sanofi SA (the parent company of a global healthcare organisation based in France) and the trustees of the Sanofi Pension Scheme to settle a potential Financial Support Direction (FSD) case through the agreement to put in place enhanced financial support. 

Group restructures over the years had led to various statutory employer changes for the scheme and certain transactions had led to the payment of significant dividends to other group companies and a weakening of the employer covenant to the scheme. As at 1 January 2018, there were approximately 16,500 members in the scheme, an ongoing funding deficit of £279m and an estimated buyout deficit of £1,692m. 

The Regulator did not consider that the mitigation and limited formal support that had been provided to the scheme was enough to mitigate the risk that the remaining employers would be unable to meet the underfunding without further group support.

Discussions surrounding the 2015 and 2018 valuations did not, in the Regulator’s view, increase the financial support sufficiently and the Regulator opened an FSD investigation in August 2019 concluding that it had a strong case for obtaining FSDs against targets in the group. Following notification of the Regulator’s intention to issue a Warning Notice, and given the group was proposing another restructuring exercise which would result in further employers leaving the scheme, a settlement was agreed in November 2020 which included the following forms of support: 

  • Guarantee: Sanofi SA to provide a new guarantee package for the scheme; guaranteeing annual deficit repair contributions against a prudent long-term funding target and protection of up to £730m in the event of insolvency for approximately 20 years. 
  • Dividend matching: A legally binding agreement whereby dividends paid to the wider group will be matched by the same level of scheme payments. 
  • Upfront funds: An upfront payment into the scheme of £37m. 

The report emphasises the willingness of the Regulator to enter ‘meaningful’ settlement negotiations in parallel to its investigations, which can lead to positive outcomes without having to invoke its moral hazard powers with associated costs. 

Deadline for Regulator and FCA call for input extended to end of July 2021

The deadline of the Regulator’s and the Financial Conduct Authority’s call for input from the pensions industry on improving the consumer pensions journey has been extended from 30 June 2021 to 30 July 2021.

PMI launches new lay trustee accreditation regime

The Pensions Management Institute (the PMI) has launched a new accreditation regime for lay trustees – this follows the APTitude programme for professional trustees which was set up last year. To achieve accreditation, applicants would need to complete the Regulator’s Trustee Toolkit and the PMI’s Certificate of Pension Trusteeship. In addition, each year lay trustees would need to undertake 15 hours of relevant continuing professional development and complete any new or amended Trustee Toolkit modules to retain their accreditation. The Regulator has welcomed the initiative.

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