Northern Rock pension blip

Thu, 21 Feb 2008

Fresh reports in the pensions news indicates that the nationalisation of troubled mortgage lender Northern Rock has firmed up concerns over pension security, but could have created a blip surrounding how the scheme invests money .

A principal at Punter Southall, Richard Jones, was reported in the pensions news as commenting: "If the nationalisation is only a temporary measure as has been suggested, it will be interesting to see whether or not the government seeks clearance from the Pensions Regulator when Northern Rock is returned to the public market and the trustees once again become dependent on the covenant provided by the bank itself."

One of the hard and fast rules of pension schemes is that they may not invest in assets of the parent organisation. However, when Northern Rock were taken over by the government, the pension scheme (which is invested in government-issued securities called gilts) effectively became illegal.
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