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Financial Support Directions: issues for banks and lenders

 

23 January 2017

The Pensions Regulator’s power to issue a financial support direction (FSD) could mean that a bank, lender or other corporate investor may find itself within scope to be ordered to provide financial support to a pension scheme sponsored by a third party. External business activities with third parties could result in the lender being 'connected' or 'associated' with a third party employer that participates in a defined benefit pension scheme.

If such a connection is established, the lender could become a potential target of an FSD in relation to that third party's pension scheme. In the worst case scenario, failure to comply with an FSD which has been issued in relation to a specified defined benefit pension scheme could mean the target of the FSD becomes liable to pay the pension scheme deficit in full.

  •  provides a summary of how and when an FSD can be issued
  •  highlights the potential significance of FSDs to banks, lenders and corporate investors
  •  sets out practical checks and safeguards to help protect banks, lenders and corporate investors from these wider FSD risks.
 

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