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The pensions watchdog today revealed plans to bare its teeth and crack down on firms who prioritise paying dividends over funding pension schemes.
In bolder plans, the Pensions Regulator (TPR) said it will ramp up its scrutiny of deficit reduction plans.
The news follows a Conservative party pledge to hand more powers to the pensions watchdog in the wake of the Philip Green BHS scandal.
“The shadow of Philip Green and BHS looms large over TPR's barely-disguised threat to companies paying out handsome dividends while failing to close gaping pension deficits," said Tom Selby, senior analyst at AJ Bell.
Selby said a reduction in payouts could have far-reaching consequences for investment growth, and a balance must be struck.
“However, company bosses have been put on notice that pension scheme members cannot be treated as second-class citizens when it comes to allocating resources.
"Ultimately the clampdown proposed by Theresa May coupled with the message from the regulator today will likely see more companies looking to sell their defined benefit liabilities to insurance companies in order to get the risk off their balance sheet," he said.
TPR will expect firms to shorten deficit reduction periods, and it will consider launching investigations to assess the levels paid to the scheme and to shareholders, the regulator said in its annual statement on defined benefit scheme funding.
"Where we believe there is sufficient affordability to increase contributions to the scheme, we will take steps to ensure that an appropriate balance is struck between the interests of the scheme and shareholders by the employer," TPR said.