Pensions Regulator gets tough on conflicts

Firms with burgeoning pensions practices could face a threat to their client lists under conflicts of interest guidance set out by the Government’s Pensions Regulator.

The guidance, which is currently out for consultation, states that as a best-practice standard pension scheme trustees should not use the same legal adviser as the company funding the pension.

Ian Pittaway, senior partner at pensions boutique Sacker & Partners, said the reason for this is that if, for example, the company was involved in a takeover, its interests and those of the trustees could be at odds. This situation arose last year during private equity house Kohlberg Kravis Roberts & Co’s acquisition of Alliance Boots, when Boots pension scheme trustees threatened to halt the deal over a funding dispute.

Pittaway said: “Those firms that try to act for both trustees and employer will find that model increasingly under pressure, as it has been for a while.”

Firms will have to choose between doing corporate work for the company or less lucrative trustee work, which accounts for the bulk of pensions practices’ fees.

Herbert Smith pensions partner Roderick Morton said trustees have been aware of the potential for conflict since the 1997 Pensions Act and have chosen their advisers accordingly.

But he added: “One of the things we have to look at is who the adviser would stay with in the event of a conflict. If it was a big corporate client you would stick with them because you get lots of work from them.”