Sanofi agrees to inject tens of millions of pounds into UK pension scheme


Sanofi, one of Europe’s largest drugmakers, has agreed to inject tens of millions of pounds into its UK pension plan after regulators threatened enforcement action.

The UK Pensions Regulator said on Tuesday that as well as adding £37m to the retirement plan, which covers 16,000 people, the French pharmaceutical group had also committed to new financial guarantees.

The regulator’s concerns with the defined benefit plan date back to 2015, but it only opened a formal investigation in August 2019 amid worries that financial support for the plan had been eroded by successive restructurings at Sanofi.

“Some of these transactions resulted in significant dividends being paid to other companies within the group, and while the pension scheme had received some mitigation as a result of the restructures, the direct covenant supporting the scheme had weakened,” the regulator said in a report published on Tuesday.

The scheme had a funding shortfall of £279m at its last health check in 2018. Under defined benefit schemes, employers are liable for meeting pension promises made to staff.

“We signalled our intention to use our anti-avoidance powers which prompted Sanofi to engage in meaningful discussions with us and the scheme’s trustee,” said Erica Carroll, director of enforcement at the TPR.

“This case demonstrates how productive negotiations can be carried out alongside our investigations so that the best possible outcome is achieved for savers.”

While Sanofi had put in place a package offering some additional support for the plan, the regulator deemed it insufficient.

Sanofi, which is headquartered in Paris and is one of the world’s largest vaccine makers, generated revenues of €36bn last year.

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The regulator said it had been preparing to issue a so-called warning notice for financial support directions, which can require other entities within a group to support a scheme, when Sanofi approached the watchdog, and the scheme’s trustee, to start talks.

“Following negotiations between the targets of our regulatory action, the trustees and TPR, an agreement was reached that provides the pension scheme with enhanced financial support,” the regulator said.

Under the agreement, the defined benefit scheme will also receive £730m in event of Sanofi’s insolvency. Any dividends paid to the wider Sanofi group by UK-based entities sponsoring the scheme will be need to be matched by payments of a similar amount to the pension plan.

“This is quite a significant settlement for the regulator,” said John Ralfe, an independent pensions consultant. “To get to a financial support directive — usually don’t get as far as that. This is a very good example of the regulator flexing its muscles.”

In a statement, Sanofi said “we do not have any concerns about insolvency, and we have never had any doubt about Sanofi’s ability and commitment to support its UK scheme now and in the future.

“Nevertheless, we are happy the agreed package has put any concerns of the Pensions Regulator to rest and will allow us to continue our focus on helping people live longer and healthier lives.” 

With additional reporting by Hannah Kuchler



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