Comment

1. Transfers  

From April 2012 it has been possible to make transfer payments from contracted-out to contracted-in pension plans. Many members have a statutory right to such a transfer (irrespective of contrary restrictions in pension plan rules). Legislation sets down a number of member safeguards that must be met. Any transfer is subject to a receiving scheme being willing to accept it. Trustees should be aware of the impact on administration and member communications.  

The much awaited court decision on the status of Financial Support Directions (“FSDs”) and Contribution Notices (“CNs”) * issued by the Pensions Regulator against target companies after the commencement of English insolvency processes in respect of such targets was handed down by the court on Friday 10 December 2010. The reluctant decision of Mr Justice Briggs that FSDs and CNs in these circumstances were not provable debts but ranked as expenses of the insolvency process, taking precedence ahead of unsecured creditors, has caused dismay in the restructuring community.

According to a ruling of the High Court, Financial Support Directions and Contribution Notices issued by the Pensions Regulator once an English insolvency process has commenced rank as expenses of the insolvency process (and therefore take precedence over ordinary creditors). This ruling will cause huge practical difficulties for insolvency practitioners. The decision is subject to appeal.

Two documents on winding up procedures have recently been released for consultation. The first is a joint statement by the Pensions Regulator, the Pension Protection Fund and the DWP in respect of the Financial Assistance Scheme on the regulation of schemes in wind up and in a PPF assessment period. The second is a set of good practice guidelines from the Pensions Regulator on avoiding delays in the winding up of schemes.

A landmark ruling has paved the way for companies to restructure without necessarily making their pension scheme ineligible for the Pension Protection Fund (PPF). Trustees in the case of L v M sought the court’s support (and that of the Pensions Regulator) for a plan to prevent the insolvency of the sponsoring employer which would result in an apportionment of the debt due to the scheme from the employers, the winding up of the scheme and would take the scheme into the PPF.

There has always been a tension between protecting the interests of defined benefit pension schemes and insolvency given on the one hand The Pensions Regulator (TPR) seeks to protect the interests of pension scheme members and the Pension Protection Fund and on the other, the insolvency regime seeks to protect the interests of creditors as a whole.

The DWP is consulting on new powers for The Pensions Regulator (TPR). The consultation covers:

Summary

On 26 July 2012, the Pensions Regulator (the 'Regulator') issued a statement on financial support directions (FSDs) with the intention of providing further guidance and comfort with regard to the circumstances in which it will issue an FSD after a company has been placed into administration.

Ever since the establishment of the U.K. Pensions Regulator (the "Regulator") by the U.K. Pensions Act 2004 (the "Act"), the Regulator's exercise of its authority has been of major importance to the U.K.'s restructuring and rescue business. The first judicial review of the Regulator's powers, however, hints that some of the procedures it has adopted may be curbed in the future.

The Pensions Regulator and the Restructuring Environment