Experts query whether £31m offer will satisfy TPR in Box Clever case

This was revealed in ITV’s 2020 interim results published on August 6, which showed that £31m had been put aside to settle the case.

A six-month deadline had been imposed by TPR in March to put in place financial support for the Box Clever pension scheme, which has roughly 2,800 members and a deficit of around £115m, after the Supreme Court rejected ITV’s attempt to challenge the regulator’s case.

TPR’s determinations panel had issued financial support directions to ITV plc and four related entities.

As at April 30 2020, the scheme’s deficit was estimated at £110m, so whether ITV’s initial settlement proposal will be accepted as sufficient still remains to be seen

Clive Pugh, Burges Salmon

In a press statement on March 17, Erica Carroll, director of enforcement at TPR, said: “In a bid to avoid responsibility for the Box Clever scheme, ITV has used every possible legal channel to fight against our actions to safeguard the retirements of thousands of members.” 

Box Clever was formed in 2000 as a joint venture between the TV rental businesses of Granada (now ITV) and Thorn (now Carmelite). When the joint venture went ahead, employees were transferred to the new company and enrolled in the Box Clever pension scheme. TPR opened an anti-avoidance investigation following the collapse of Box Clever. 

In the latest twist in this unfolding saga, the regulator confirmed on August 10: “We have received a proposal from ITV plc for supporting the Box Clever pension scheme… we are assessing it and will respond to the company.”

ITV had not responded to our request for a comment by the time this story was published.

ITV offer less than deficit

Commenting on the case, Clive Pugh, partner at Burges Salmon, said: “As at April 30 2020, the scheme’s deficit was estimated at £110m, so whether ITV’s initial settlement proposal will be accepted as sufficient still remains to be seen.” 

He added: “TPR does not issue financial support directions very often — in fact, only four have been issued to date, with the Box Clever case being the most recent.”

Mr Pugh explained that FSDs are a “formidable weapon”, involving the power to “pierce the corporate veil” by targeting related companies as well as the sponsor. 

“This... means that complicated group structures will not be enough to protect connected businesses from feeling the full force of an FSD,” he said.

A further strengthening of the FSD power is anticipated by the government, which Mr Pugh said could “cover controlling shareholders of the sponsoring employer, and bringing in a civil penalty of up to £1m for non-compliance”.

The threat of FSDs alone is enough to ensure that they are rarely used, according to Matthew Arends, head of UK retirement policy at Aon.

“More specifically, earlier in the process TPR will have issued a warning notice to relevant parties involved in the case giving notice of TPR’s intention to use its powers,” he said.

“Although warning notices are issued privately, we do know 18 of them had been issued by TPR up to August 2018, and while no doubt some of them would not have been resolved by that date, this does indicate that most situations are resolved before getting to the FSD stage.”

Needlessly time-consuming and expensive

However, some experts have said that the current regime is too cumbersome and ripe for reform. 

“The framework in which TPR operates is needlessly time-consuming and expensive,” said Geoff Egerton, managing associate at Linklaters.

“Parties are forced through the initial and costly determinations panel stage with no legal mechanism for a ‘leapfrog’ of that stage, to the level playing field of the Upper Tribunal, something that does exist in the Financial Conduct Authority’s jurisdiction.

“This means parties settle due to the time and cost involved, with no judicial precedents established. There are no proposals to reform this process.”

Mr Egerton added that FSDs can be issued against companies connected to the sponsor as long as it is reasonable and the sponsor cannot afford to do so, but that this is decided without considering the amount or type of support being demanded. 

“This is a strange feature of the legislation. It is necessary to first assess the reasonableness of imposing an obligation without knowing what the nature of that obligation is,” he said.

“ITV’s accounts allude to this point where provision is made for a notional amount, but the ultimate form and amount of the support is still open to dispute.”