Trade Association Says UK COVID Bill Could Hurt Pension Industry

The PLSA warns of ‘unintended negative consequences’ for pensions of insolvent firms.


UK trade association the Pensions and Lifetime Savings Association (PLSA) said it is concerned that a bill intended to improve the ability of companies to restructure efficiently and provide COVID-19 relief will have “unintended negative consequences” for the pension industry.

The PLSA said the Corporate Insolvency and Governance Bill allows for the possibility of bank lenders to be “higher up the pecking order” than employees’ pensions when it comes to recovering cash from a company that becomes insolvent.

The bill, which was introduced in May, would implement landmark measures to improve the ability of companies to be efficiently restructured, reinvigorate UK rescue culture, and support the UK’s economic recovery. It also includes temporary measures to ease pressure caused by the COVID-19 pandemic.

The PLSA said it has written to Paul Scully, the Business, Energy, and Industrial Strategy (BEIS) Parliamentary undersecretary of state, saying it believes some small, but significant, amendments to the wording of the bill could rectify the problem without compromising the intentions of the bill.

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Under current rules, debts owed to a defined benefit pension plan, as unsecured creditors, are paid out after secured creditors in an insolvency situation, unless the plan has a form of contingent security. When a plan sponsor becomes insolvent, the majority of the deficit will often remain unpaid, and the UK’s Pension Protection Fund (PPF) will take responsibility for paying out plan members’ compensation.

However, the PLSA said the bill’s proposal for a new company moratorium that allows up to 40 business days of protection from legal processes against a company will make recovering unpaid pension contributions even more difficult than it already is.

“We and our members fully appreciate the need for emergency protective measures to help companies survive the unprecedented business disruptions from COVID-19,” Nigel Peaple, PLSA’s director of policy and research, said in a statement. “However, the new proposals will have unintended—but very serious—consequences for underfunded pension schemes where the employer becomes insolvent, as well as for the Pension Protection Fund.”

The changes that the PLSA says should be made to the bill include:

  • Limiting the bank debts that gain “super priority” to those that become due and payable on a non-accelerated basis during the moratorium;

  • Narrowing the definition of financial arrangements that gain super priority so that it only covers the bank debts and does not extend to all financial arrangements and lending; and

  • Amending legislation to provide for a Pension Protection Fund assessment period to be triggered when a company enters a moratorium.

Peaple said that if the bill isn’t amended, it “will have the effect of reducing the protection and rights of defined benefit schemes and the Pension Protection Fund where companies are in financial distress.”

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Ray Dalio Fund’s Assets Tumbled 15% During Pandemic Crash

The world’s largest hedge fund took a long tilt in its positions leading up to the market dive, underestimating the coronavirus threat. 


Bridgewater Associates, the world’s largest hedge fund, lost 15% in assets under management during the coronavirus-induced market crash in March and April. 

Assets under management at the hedge fund tumbled to $138 billion in April, down $25 billion from $163 billion in February, according to company filings that were first reported on this week by Bloomberg News. 

Bridgewater Associates did not immediately respond to request for comment. 

Markets have since mostly rebounded. Since their March lows, the S&P 500 is up around 40%, while the tech-heavy Nasdaq has made up all its losses and has climbed roughly 46%. 

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But the losses are another sign of the effect the pandemic has had on the hedge fund that made its name generating returns during the 2008-09 financial crisis. 

In mid-March, founder Ray Dalio took to LinkedIn to confirm reports that the company’s flagship fund, Pure Alpha, had dropped roughly 20% for the calendar year. The hedge fund’s two All Weather portfolios were also down 12% and 14%. 

Dalio said the firm had taken a long tilt in its positions to take advantage of liquidity in the markets leading up to the market crash. Leaders at the hedge fund expected the coronavirus to be yet another one of a number of unknown risks in 2020, including cyber threats and the possibility of wars breaking out in Iran and North Korea.  

The slide in performance lost the hedge fund some investors, including the Virginia Retirement System, which Bloomberg reported decided to pull $178 million from Bridgewater Pure Alpha II in April. 

The standard minimum fee for Bridgewater’s Pure Alpha and Pure Alpha Major Markets strategies is $6 million, according to the hedge fund’s filings. 

Still, the slide hasn’t deterred other investors from investing in the hedge fund. In May, SkyBridge Capital, the investment firm founded by Anthony Scaramucci, said it would allocate $100 million to Bridgewater.

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