Employment and Benefits

Subscribe to Employment and Benefits via RSS
Finance_016_britishCoinsGraph_single-col-color-350x282

The UK government has signalled the importance of introducing a permanent superfund regulatory regime.

By Victoria Sander

After the excitement around Clara-Pensions’ approval as a “superfund”, or pension consolidator, in late 2021, the market generally expected that other pension superfund structures would soon follow suit. Last year’s mini-budget and the ensuing liability-driven investment (LDI) crisis, which triggered intervention by the Bank of England, no doubt weighed negatively on the development of the pension consolidation market, along with an increased focus on investment strategies for pension schemes generally. The expected pipeline of further approvals failed to deliver new participants in a market which was to provide much-needed de-risking capacity alongside the burgeoning and highly successful insurance bulk annuity transfer market.

Hopes were revived by the Chancellor’s Mansion House speech on 10 July 2023, which commented on the fragmentation of the defined benefit (DB) pension scheme landscape in the UK and the importance of introducing a permanent superfund regulatory regime, presenting a key policy direction by the government.

On 10 August 2023, the Pensions Regulator (TPR) announced revised guidelines for pension superfunds. The original guidance, issued in 2020, established an interim regime for superfunds and set out tests for when a pension scheme would be appropriate to transition to a superfund.

This blog post examines the updated pension superfund guidance and provides a high level overview of the key changes.

The Financial Services Skills Commission has issued an insight paper outlining how companies can collect and evaluate data on employees’ socioeconomic backgrounds.

By David Berman, Nicola Higgs, Rob Moulton, and Dianne Bell

Socioeconomic backgrounds of employees and socioeconomic diversity at senior levels across the UK financial services industry is beginning to feature more prominently in diversity and inclusion (D&I) discussions. Several government and industry taskforces and studies conducted on the issue of social mobility and class advantages/disadvantages have revealed striking impacts of this bias within the UK financial services sector. Not only is the sector significantly reliant on individuals from higher socioeconomic backgrounds at the leadership level, but the studies also indicate that employees from working class or lower socioeconomic backgrounds are held back in a number of ways (which may lead to their eventual departure from the sector).

  • Progression gap: Employees from working class or lower socioeconomic backgrounds progress 25% slower than peers despite no difference in job performance, and they find conforming to the dominant cultures “exhausting” and this impacts on their individual performances.
  • Pay gap: A class pay gap of £17,500 appears to exist in financial services (compared with £5,000 in the technology sector).
  • Opportunities to upskill talent: Findings suggest that individuals from lower socioeconomic backgrounds are less likely to sign up for training opportunities.

From a regulatory perspective, this lack of diversity at the senior level impacts the culture of a firm, raising concerns around, for example, groupthink and its impacts on effective decision-making.

The Cura Italia Decree also extends the validity of administrative authorizations.

By Cesare Milani

On March 17, 2020, the Italian government adopted Law Decree No. 18/2020 (the Cura Italia Decree), providing for a contingency package of extraordinary measures to strengthen the national health service and provide financial and economic support to families, workers, and companies facing the pandemic.

The Cura Italia Decree entered into force on March 17, 2020, and shall be converted into law, following potential amendments, within 60 days from its adoption.

From a public law perspective, the Cura Italia Decree sets forth the following key measures:

The Commissioner held senior leadership accountable for illegal “sign-stealing”, even though the conduct generally involved players and low-level operations employees.

By Nathan H. Seltzer, David Berman, Christopher D’Agostino, and Nell Perks

On 13 January 2020, the Major League Baseball Commissioner handed down significant punishment (including fines and suspension) to the Houston Astros baseball team and its managers following an investigation into “sign-stealing” (a practice that violates the Major League Baseball Regulations) during the 2017 season and playoffs.…

The DOJ’s recently updated guidance poses helpful questions for UK corporates evaluating the effectiveness of their internal compliance programmes.

By Stuart Alford QC, Erin Brown Jones, and Nathan H. Seltzer

It is well known that a corporate’s failure to prevent offences can be answered with a defence of “adequate procedures” in a case of bribery or “reasonable procedures” in a case of failure to prevent the facilitation of tax evasion. However, with no case law to aid comprehension of what “adequate” or “reasonable” mean, UK corporates are forced to seek answers elsewhere.

The UK government has issued guidance alongside both the Bribery Act 2010 and the Criminal Finances 2017, and these documents remain the principal source for interpreting those acts. However, UK companies looking to understand the wider expectations of law enforcement — particularly companies that operate in multiple jurisdictions — may find useful the US Department of Justice’s (DOJ’s) updated guidance “Evaluation of Corporate Compliance Programs” and recent comments from Assistant Attorney General Brian Benczkowski introducing the updated guidance, which replaces similar DOJ guidance issued in 2017.

By Catherine Drinnan and Shaun Thompson

Click for larger image.

This year has seen a significant number of business failures, particularly on the high street, as businesses have struggled in the face of market fragility and Brexit uncertainty. When a UK portfolio company is underperforming, the presence of a defined benefit pension (DB) plan with a large deficit can be a significant problem. Companies with large pension deficits require contributions that affect cash flow and make exiting more difficult when the time comes to sell.

If a business slips into distressed territory, however, there are mechanisms whereby a company can divest itself of a DB scheme. As companies respond to Brexit and challenging conditions in some sectors, we believe that 2019 will see more of these types of arrangements. In our view, PE deal teams should consider how to respond if portfolio companies are at risk. While the mechanisms can be effective in allowing a company to continue trading (in some form), PE owners should note a number of important factors before deciding to attempt this.

By Catherine Drinnan, Shaun Thompson, Richard Butterwick, Terry Charalambous, and Catherine Campbell

This year has seen a significant number of business failures, particularly on the high street, as businesses have struggled in the face of market fragility and Brexit uncertainty. When a UK company is underperforming, the presence of a defined benefit pension (DB) plan with a large deficit can be a significant problem. Companies with large pension deficits require contributions that affect cash flow and make exiting more difficult when the time comes to sell.

If a business slips into distressed territory, however, there are mechanisms whereby a company can divest itself of a DB scheme. As companies respond to Brexit and challenging conditions in some sectors, we believe that 2019 will see more of these types of arrangements. In our view, corporates and M&A deal teams should consider how to respond if companies are at risk. While the mechanisms can be effective in allowing a company to continue trading (in some form), corporates should note a number of important factors before deciding to attempt this.

By Sarah Gadd

Companies that operate in the “gig economy”, using a largely self-employed workforce, have enjoyed enormous growth in recent years but in the UK, these companies have come into conflict with long-established UK employment law. In our view, current laws are not fully equipped to deal with new staffing models in which staff and companies alike are looking for more flexibility than the traditional “master-servant” employment relationship affords. Private equity deal teams should closely consider employment status when they evaluate deals, particularly if a significant proportion of the workforce is self-employed. This is not only an issue in the newer gig economy sector but also in industries that operate a self-employed model, particularly where small, independent businesses become part of larger corporate entities, as we have seen with the dental industry in recent years.

By Cesare Milani

As corporate responsibility and business integrity become increasingly important to global commercial businesses, Italy has responded domestically with a review of two key laws which may significantly impact Italian companies.

Italian Legislative No. 231 dated June 8, 2001 (Decree 231)

Decree 231 has been in force for seventeen years and is likely to be significantly amended during the course of 2017.

On November 4, 2016 a draft proposal (No. 4138 – the 231 Draft Law Proposal) was filed with the Chamber of Deputies of the Italian Parliament. An appointed commission is currently evaluating such draft, in consultation with a number of different economic operators (e.g. trade associations, banks, insurances, etc).

By Paul Davies and Michael Green

Commercial risks to businesses can no longer be neatly divided into financial and non-financial considerations. For example, there is growing recognition, particularly in the pensions sector, that a failure to take account for environmental and social governance (ESG) risks (in particular, climate change risks) can result in adverse financial consequences. While a revised EU directive  will impose an obligation on pension fund managers to consider ESG issues, pension trustees may already be subject to potential legal liability if they ignore material financial risks resulting from climate change (traditionally considered only a moral or ethical concern) in investment portfolios, according to legal counsel.