Faith Dickson comments on RAAs: Value protection or moral hazard?
Are regulated apportionment arrangements the answer for insolvent employers?
The regulations and oversight of the UK Pensions Regulator (TPR) can only protect a pension scheme’s members so much. Sometimes there is nothing that can be done for a plan sponsor in terminal decline.
Yet if a company believes it could succeed were it not saddled with its pensions burden, it can petition the TPR for a regulated apportionment arrangement (RAA).
An RAA splits a business from its pension fund and allows it to continue trading. The concession is that in exchange for the pension scheme debt, the Pension Protection Fund (PPF) receives equity in the phoenix company. In time, it is hoped – rather than expected – that this asset will deliver returns in excess of those available at insolvency.
Read the full article in IPE here.