Question to the Department for Business, Energy and Industrial Strategy:

To ask the Secretary of State for Business, Energy and Industrial Strategy, if she will make an assessment of the potential for pre-packaged administrations to be open to abuse as a way of passing on pension liabilities to the Pension Protection Fund.

A pre-packaged sale in administration, whereby the sale of all or part of the business is arranged prior to the company entering formal insolvency and realised on or immediately after the appointment of the administrator, is a valuable business rescue tool. Pre-pack sales help to avoid a deterioration of the value of the company’s business between appointment of the administrator and sale, meaning there is more money available for creditors, including the pension scheme. In most cases where pre-packs are used, the only alternative would be the collapse of the business and the loss of all employees’ jobs.

The government is aware of concerns about the transparency of pre-pack sales, particularly where a business is sold to a person connected with the old company. It is currently evaluating whether legislative measures are necessary to regulate pre-pack sales to a connected person, following a review of a package of voluntary industry measures implemented in 2015 to improve creditor confidence in pre-packs. As part of the review the government liaised with the Pension Protection Fund, which made clear in its response to concerns raised by the Chair of the Department of Work and Pensions Select Committee, that it does not fundamentally take issue with pre-packs but where there are concerns, these are referred to the Pensions Regulator for investigation.