Has the rescue culture lost its way?
Responding to the question raised in my last post, New law, insolvency regulation and the rescue culture, a former colleague, Paul Brindley, believes that the rescue culture has lost its way:
In my view the rescue culture has lost its way. There are three reasons for this:
1) The law regarding financial support directions was drafted purposely to enable creditors, not the government and not the pension fund industry generally, to meet final salary shortfalls. For the last twenty odd years every government has seen final salary schemes as an additional taxable opportunity;
2) Legislation often has unintended consequences - European employment legislation particularly so; and
3) The insolvency profession as a whole has lost its way. The governing bodies have no vision and they are seen more by outsiders as trade associations whose role is to maintain the status quo.
So yes, the rescue culture involving IPs is dead, this is recognised generally outside of the profession, just not within it.
Although I disagree with Paul's first point - FSDs are an administration expense because of a drafting error in the Pensions Act as I indicated in Nortel and Lehman FSD/CN pensions liabilities an administration expense - his other observations are sound.
However, I am an optimist and firmly believe that the rescue culture can be turned around. It may be in intensive care, but it is not yet dead. Paul continues the debate here.
Legislative change is a vital part of the remedy, as I indicated in my original piece. I hope that when the portfolios are reallocated after Edward Davey's promotion to Secretary of State for Energy and Climate Change, whoever takes ministerial responsibility for insolvency will act to restore the rescue culture.
Date: 11th February, 2012
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