Anne-Marie Winton dissects The Pensions Regulator’s (TPR) recent report on the outcome of its investigation into Rutland Partners-backed Bernard Matthews and what it means for private equity investors.

Arc Pensions Law has about 40 clients who outsource pension lawyers, which gives the firm a lot of reach and range into different types of transactions. As a partner, Anne-Marie has experience as a trustee adviser, dealing with day to day issues for all sizes of occupational schemes and also specialises in advising UK and non-UK employers and groups facing challenging situations.

A recent report by the Pensions Regulator about why it has decided not to issue a contribution notice after an investigation into how private equity-owned Bernard Matthews Limited’s (BML) Pension Scheme entered the Pension Protection Fund (PPF) is of particular interest to many private equity investors. The decision, announced in July, indicates that the Regulator can accept private equity firms making substantial profits, even where their efforts to turn around a business are unsuccessful. It comes as a relief for many in the private equity industry.

In relation to how the outcome of the investigation contrasts with some perceptions of private equity, Anne Marie commented:

“Rutland earned a £14m return on its investment in the company and at the time, were criticised for ‘lining their own pockets’ while pensioners faced cuts to their retirement benefits. There is a lot of skepticism surrounding private equity firms when it comes to pension schemes and you often hear the term “asset stripping” being thrown about in relation to the industry’s practices. The outcome of the investigation, however, indicates that the private equity firm acted reasonably, demonstrated its commitment to restructure a business and where it has negotiated the terms of its investment on an arm’s length commercial basis and those terms are in line with industry practice at the relevant time.”

When asked if the 2013 rescue would have gone ahead in today’s climate, given the new criminal offences contained in the Pension Schemes Bill’s this year, she added:

“Yes, this is likely to be the case. New legislation is going to increase the focus on the treatment of defined benefits pension schemes as stakeholders in a business (typically the largest unsecured creditor). The aim is to ensure that these types of schemes are not damaged by corporate activity (whether ‘vanilla’ or distressed), with a new regime of large fines (up to £1 million) and criminal sanctions (up to 7 years in prison) for breaking the law. Mandatory engagement with the Pensions Regulator and scheme trustees is going to be required in certain circumstances, but this simply reflects best current practice anyway. And this was shown by the Bernard Matthews case, where the trustees agreed the terms of the initial private equity investment and the chance of turnaround that this gave as preferable to the alternative of insolvency of the sponsoring employer and the pension scheme entering the PPF in 2013. But getting and keeping the Regulator and trustees in the loop (even if this is over a period of years) is, and will continue to be under the new law, essential.”

Read Anne-Marie’s full interview in Real Deals (behind paywall).