The Pensions Regulator (TPR) has issued a statement on Regulated Apportionment Arrangements (RAAs) and employer insolvency.

Employers of multi-employer schemes can use a number of mechanisms under the Employer Debt Regulations 2005 to manage a debt triggered under section 75 of the Pensions Act 1995. Broadly, RAAs can be used in situations where a scheme has entered into a Pension Protection Fund (PPF) assessment period, or is likely to enter into such an assessment period. TPR must approve an RAA.

DWP consults on amendments to the employer-debt regulations

The Pensions Regulator (the Regulator) recently used its powers under the Pensions Act 1995 to appoint an independent trustee to the exclusion of all other trustees of the scheme. The employer was required to pay the fees and expenses relating to the appointment.

The Regulator decided to use its powers because:

In Bridge Trustees Limited v Noel Penny, Judge Purle QC, sitting as an additional Judge of the High Court, held that the Court could use its inherent jurisdiction to permit an independent trustee to distribute surplus in a scheme that was winding-up. Under the Pensions Act 1995, an independent trustee is appointed to exercise powers otherwise conferred on the employer where an insolvency practitioner begins to act in relation to a company.

A company went into administration and company voluntary arrangements were entered into to effect a rescue of viable parts of the group. As part of that process, a valuation of the liabilities of the companies as at 1 October 2001 was required. They included claims arising under section 75 of the Pensions Act 1995. However, those debts were not triggered until July 2004 and the scheme actuary for did not sign the section 75 certificates and apportion shares amongst the various companies until March 2006.

If an employer is affected by an insolvency event the insolvency practitioner or official receiver is obliged to notify the trustees of the employer’s pension scheme, the Pensions Regulator, and the Pension Protection Fund of the fact of the insolvency event. Here, we provide an overview of the pensions issues arising from employer insolvency.

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Uncrystallised pension pot remains protected following bankruptcy

Following consultation last autumn, the Government is once again changing the Regulations under s75 Pensions Act 1995.

The changes1 take effect on 6 April 2010. They are intended to facilitate corporate restructurings. They also address some minor technical issues. The Government has postponed any more fundamental rewriting of the Regulations, saying that “this is a complex area that deserves closer consideration”.

Restructurings

Following an informal consultation in late 2008, the DWP is now consulting formally about changes to the Employer Debt Regulations made under s75 Pensions Act 1995. The consultation document can be found at www.dwp.gov.uk/consultations/2009.

The main proposed changes are intended to facilitate corporate restructurings, but other changes are designed to address some technical problems with the Regulations.

Corporate restructurings

The Government is proposing to amend (for a twelfth time!) the Regulations under s75 Pensions Act 1995. The amendments would make it easier to vary the basis on which liability is shared between employers.

Background – the Regulations as they stand