The regulator's anti-avoidance powers have not held corporate activity hostage

It was even suggested corporate activity would be held hostage by the needs of defined benefit pension schemes. 

The dire predictions of corporate meltdown have not proved correct

The regulator’s powers to issue contribution notices and financial support directions are undoubtedly part of a formidable armoury. They have been used to pursue employers and connected parties trying to avoid paying their liabilities to DB schemes. But a decade on, have the doomsayers been proved correct? 

Although the names Bonas, Desmond, Lehmans, Nortel and Sea Containers are now part of the pensions lexicon, the CNs and FSDs they represent are still the exception rather than the rule. 

The regulator’s determinations panel has reported only eight occasions where the anti-avoidance powers have been used: three for CNs and five for FSDs. 

Some of these decisions did, of course, involve multiple applications and directions – in the Lehmans reference 44 companies were targeted but only six received an FSD. Nevertheless, in any objective review, eight determinations are a trickle and not a torrent.

Interestingly, the cases brought before the determinations panel have a global feel, with companies either based outside the UK or with an overseas parent company.

Is it unfair to suggest the regulator had an eye on sending a message that it can pursue businesses and individuals anywhere in the world?

Could there also be a reluctance to bring more cases until all the issues connected with the powers are resolved? Several of the cases already determined continue to play their way through the complex legal processes which govern the anti-avoidance powers – in both the Upper Tribunal and other courts. 

While these challenges are not surprising given the sums of money involved and the fact that the powers in question are relatively new, those exercising those powers do not generally welcome an outside review of their decisions.

Below the surface

But reported cases do not tell the whole story. Not all investigations end with a formal decision. Informal pressure can be brought to bear on companies and individuals who appear reluctant to pay at first and satisfactory agreements can be made behind closed doors. 

In 2012-13, the regulator investigated 17 anti-avoidance cases, and yet there were no formal determinations. 

It has also shown a greater willingness to use its statutory powers to demand information that allows it to carry out investigations and decide whether to pursue an anti-avoidance case. Fifty such demands were issued in 2012-13.

Similarly, given the focus on its remit to improve funding and governance and, more widely, to educate trustees so that they are better placed to undertake their role, there was probably an element of sending a message to others through these first decisions. 

Few trustees today can be unaware of the need to assess covenants and look at opportunities to take security over connected assets as part of the funding process. Encouraging more robust funding plans ultimately reduces the need to look elsewhere to pay for the benefits.

The wider picture also plays a part in shaping actions. For most of the time the regulator has been in existence, the UK economy has been in its most turbulent state in living memory. Pursuing perceived bogeymen is much easier in good times. 

When government policy is to encourage private enterprise to grow the economy out of recession, a regulator that is willing to pursue the companies and individuals the government needs to do this is not going to be popular among the political classes.

The powers are there and the regulator has shown a willingness to use them. But so far, the dire predictions of corporate meltdown have not proved correct. Armaggedon? No.

Matthew Ambler is a solicitor at law firm Gordons