Pension Corporation (PC), an illustrious new venture with a heavy-weight board of City grandees, was accused yesterday of secretly plotting to siphon off £30 million from a fund designed to protect the retirement incomes of 62,000 former workers of GEC and Marconi.

In a strongly worded statement, the Determinations Panel of the Pensions Regulator criticised the business model of PC, which this week bought Telent, formerly GEC, the company that sponsors the pension fund, and accused it of giving conflicting versions of its plans for the £2.5 billion scheme.

It said evidence from Sir Mark Weinberg, PC’s chairman, about the company’s intentions “cannot be reconciled” with an e-mail from Edmund Truell, his chief executive, in which he set out plans to take money from a valuable escrow account linked to the fund.

That e-mail, dated September 23, “indicated that PC was “contemplating a very significant liability management exercise and as part of this was seeking to use of [sic] £30 million from the escrow in the short term”, the panel said. That appeared to conflict with public statements by PC and evidence to the regulator from Sir Mark, who suggested that there would be no immediate attempt to tap the escrow money.

The censure, in which the regulator said PC’s business model contained serious potential conflicts of interest, leaves a question mark over the strategy of the company. It was set up last year specifically to buy companies in order to take control of their pension funds.

PC’s board is packed with senior City figures including Sir Mark, the St James’s Place president, Sir Martin Jacomb, the former chairman of Prudential, Sir Nicholas Montagu, the former head of the Inland Revenue, and Bob Scott, former chairman of CGNU, the insurance giant.

Its shareholders and other backers include JC Flowers, the private equity group, Royal Bank of Scotland and HBOS.

One pensions analyst, John Ralfe, adviser to RBC Capital Markets, said: “It looks like Edmund Truell’s business model is a busted flush. I wonder whether [GEC creator] Lord Weinstock is turning in his grave.”

Sir Mark insisted there was no intention to touch the escrow account until members’ benefits were fully secured. The company had acted in good faith throughout, he said.

He said that the e-mail was in fact a note made by Mr Truell to himself as a reminder of a proposal made to Telent by its adviser, KPMG, some time earlier. It was one of thousands of documents given to the regulator during the discovery process. Sir Mark said he was unaware of it when he gave his own evidence.

Sir Mark argued that the panel had taken evidence under severe time constraints: “With no suggestion of impropriety on anyone’s part, you can’t take everything in the determination as gospel.

“Pensioners can take comfort from the fact that we cannot touch a penny of their money, or indeed of the escrow fund . . . unless and until the value of the assets, including the escrow, exceeds 105 per cent of the price of an insurance buyout.”

The regulator used emergency powers last month to install independent trustees to run the pension fund, called the GEC 1972 Plan – one of the biggest in the private sector – after PC launched its bid for Telent. The panel yesterday set out why it was upholding that decision. “At the heart of objections raised . . . is PC’s business model and investment strategy,” it said.

It also referred to the regulator’s concern that PC had not even recognised the conflicts of interest within its model, let alone put in place arrangements to manage them.

The GEC plan is attractive to buyout groups because it has first claim on a £500 million escrow account. The escrow was set up to protect members’ interests after Marconi, the renamed GEC, sold its main assets to Ericsson, thus weakening its covenant. It can be tapped by the fund to plug any deficit, but would eventually revert to Telent if it proved not to be needed.

The panel also criticised PC’s use of words such as “control” and “own” to describe its relationship with the pension fund, a body legally separate from the sponsoring company, whose only concern was to ensure that every past pension promise is honoured.

PC said its business model was still very much viable and it was confident the rift with regulators and the trustees could be healed. Mr Ralfe said the judgment raised questions over PC’s previous acquisitions of Thorn and Threshers, which gave it control over their pension funds with £1.3 billion of assets and pension promises to 16,000 existing and future pensioners.

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