Football should look to the pensions industry for inspiration when setting up its new regulator

The new Independent Football Regulator (IFR) that will be established next year should look to the pensions industry for lessons in effective regulation according to consultancy LCP.

The new IFR that the government is intending to establish to safeguard football clubs in the top five tiers of English football was announced in last week’s King’s Speech.

LCP think there are three key lessons from how pensions industry regulation has developed over the past 20 years that should be adopted in establishing an effective football regulator.

Regular monitoring and proactive engagement is more effective than dealing with problem cases When a company is in serious financial trouble its often too late for a regulator to do more than sit on the sidelines. The Pensions Regulator (TPR) has an early warning system that can be flagged when there are concerns about a company’s finances.

TPR’s ongoing monitoring covers the financial position of both the pension scheme and the sponsoring company. In football this would equate to monitoring both the football club and its owner’s position.

The IFR needs to be able to monitor on an ongoing basis both the club’s finances and the willingness and financial ability of the club’s owner to continue to support the club. Early intervention is key to successful outcomes, and regular ongoing checks are the simplest way to ensure that IFR is able to intervene effectively.

Carrot works better than stick Incentivising and rewarding ‘good behaviour’ can be a powerful tool in encouraging organisations to improve the way they operate and reduce risk. In the pensions industry, the operation of the Pension Protection Fund (PPF) levy has incentivised and rewarded employers who improve the financial support to their pension schemes, by reducing the PPF levy they need to pay each year.

Within football, this could readily be done by linking part of the distribution of broadcasting revenues to how each club performs in various key areas (e.g. finances, governance, fan and community engagement, diversity and inclusion, and environmental sustainability).

A safety net is still needed to protect the vulnerable and unfortunate While football clubs are often rescued by wealthy benefactors, sadly this doesn’t always happen – Bury FC, Macclesfield Town, Chester City, Aldershot, and Maidstone United have all disappeared in recent decades. And while phoenix clubs have often been formed from their ashes, they’ve generally had to start at the bottom of the pyramid – and in the meantime local businesses and communities have suffered great distress both financially and emotionally.

In the pensions industry the Pension Protection Fund (PPF) exists as a lifeboat for scheme members. The PPF pays pensions to nearly 300,000 members of pension schemes where the sponsoring employer has gone under. While members don’t usually receive their full pensions from the PPF, the reductions are generally relatively small.

A similar approach has already been mooted by some politicians: a rescue fund that would support failing football clubs, funded by a levy on football’s broadcasting revenues and administered by the new IFR. The existence of such a fund would do much to help calm the fears of so many fans were their club to get into severe difficulties.

Bart Huby, Head of Football Analytics at LCP, commented: “There’s plenty for legislators and politicians to do over the coming months to ensure the new IFR has the powers and processes it needs to do its job properly.

“Our message is that there is no need to reinvent the wheel. The pensions industry has learnt a lot about effective regulation in the last couple of decades. If football follows its lead it should mean that many fewer clubs are threatened by financial insolvency, and can continue to stay at the heart of their local communities for years to come with all the economic and societal benefits that that brings.”

You can read Bart's blog on the topic here.